By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the Momentive Global Inc. (NASDAQ:MNTV) share price is up 77% in the last three years, clearly besting the market return of around 61% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 4.1%.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Given that Momentive Global 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Momentive Global's revenue trended up 19% each year over three years. That's a very respectable growth rate. While the share price has done well, compounding at 21% yearly, over three years, that move doesn't seem over the top. Of course, valuation is quite sensitive to the rate of growth. Keep in mind that the strength of the balance sheet impacts the options open to the company.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).NasdaqGS:MNTV Earnings and Revenue Growth October 15th 2021
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Over the last year Momentive Global shareholders have received a TSR of 4.1%. It's always nice to make money but this return falls short of the market return which was about 29% for the year. But the (superior) three-year TSR of 21% per year is some consolation. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Momentive Global is showing 3 warning signs in our investment analysis , you should know about...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This StoryMNTV
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