By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Bragg Gaming Group Inc. (TSE:BRAG) shareholders have seen the share price rise 55% over three years, well in excess of the market return (23%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 16%.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Because Bragg Gaming Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Over the last three years Bragg Gaming Group has grown its revenue at 29% annually. That's well above most pre-profit companies. The share price rise of 16% per year throughout that time is nice to see, and given the revenue growth, that gain seems somewhat justified. If that's the case, now might be the time to take a close look at Bragg Gaming Group. If the company is trending towards profitability then it could be very interesting.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
We're pleased to report that Bragg Gaming Group shareholders have received a total shareholder return of 16% over one year. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Bragg Gaming Group , and understanding them should be part of your investment process.
Of course Bragg Gaming Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.