Shareholders in Methode Electronics (NYSE:MEI) are in the red if they invested three years ago

Yahoo

14 hours ago

Methode Electronics, Inc. (NYSE:MEI) shareholders will doubtless be very grateful to see the share price up 77% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 72%. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.
Methode Electronics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years Methode Electronics saw its revenue shrink by 3.1% per year. That is not a good result. Having said that the 20% annualized share price decline highlights the risk of investing in unprofitable companies. We're generally averse to companies with declining revenues, but we're not alone in that. Don't let a share price decline ruin your calm. You make better decisions when you're calm.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Methode Electronics stock, you should check out this free report showing analyst profit forecasts.
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Methode Electronics, it has a TSR of -69% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
Methode Electronics provided a TSR of 11% over the last twelve months. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 10% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Methode Electronics better, we need to consider many other factors. For instance, we've identified 1 warning sign for Methode Electronics that you should be aware of.
Methode Electronics is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.