We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example the Metro AG (ETR:B4B) share price dropped 68% over five years. That’s an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 37%. The falls have accelerated recently, with the share price down 11% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
See our latest analysis for Metro
Given that Metro didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Metro saw its revenue increase by 4.7% per year. That’s not a very high growth rate considering it doesn’t make profits. It’s likely this weak growth has contributed to an annualised return of 11% for the last five years. We’d want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in Metro. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Metro’s financial health with this free report on its balance sheet.
We’ve already covered Metro’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Metro’s TSR, which was a 61% drop over the last 5 years, was not as bad as the share price return.
While the broader market gained around 17% in the last year, Metro shareholders lost 31%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
