Daktronics Inc (NASDAQ:DAKT) shareholders suffered a 57% loss after investing in the stock five years ago
Daktronics, Inc. (NASDAQ:DAKT) shareholders should be happy to see the stock price rise 30% over the past month. But that’s hardly comforting for those who have held on for the past half-decade, sitting on a big loss. Indeed, the share price is down 60% over the period. We are therefore hesitant to attach much importance to the short-term increase. Of course, this could be the start of a turnaround.
It is worth assessing whether the economics of the company have evolved alongside these disappointing returns to shareholders, or whether there is some disparity between the two. So let’s just do that.
Since Daktronics has made only minimal profits over the past twelve months, we will focus on revenue to assess its business development. Generally, we think this type of company is more comparable to loss-making stocks because the actual profit is so low. For shareholders to have confidence that a company will increase its profits significantly, it must increase its revenue.
Over the past five years, Daktronics has seen its revenue decline by 2.9% per year. Although far from catastrophic, it is not good. Without profit or revenue growth, the 10% per year loss doesn’t really surprise us. We don’t think anyone is rushing to buy this stock. Ultimately, it may be worth watching – if earnings rise, the stock price could follow.
You can see how revenue and earnings have changed over time in the image below (click on the graph to see the exact values).
We appreciate the fact that insiders have been buying stocks over the past twelve months. Even so, future earnings will be far more important to whether current shareholders are making money. Dive deeper into revenue with this interactive graph from Daktronics profit, turnover and cash flow.
What about total shareholder return (TSR)?
We would be remiss not to mention the difference between Daktronics total shareholder return (TSR) and its share price performance. Arguably, TSR is a more comprehensive return calculation as it takes into account the value of dividends (as if reinvested), as well as the hypothetical value of any discounted capital that has been offered to shareholders. The Daktronics TSR has been a loss of 57% for the 5 years. It wasn’t as bad as its stock price performance, as it paid dividends.
A different perspective
We regret to report that Daktronics shareholders are down 38% for the year. Unfortunately, this is worse than the general market decline of 12%. However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. Unfortunately, last year’s performance capped a bad run, with shareholders facing a total loss of 9% per year over five years. Generally speaking, long-term stock price weakness can be a bad sign, although contrarian investors may want to seek out the stock in hopes of a turnaround. It is always interesting to follow the evolution of the share price over the long term. But to better understand Daktronics, we need to consider many other factors. To do this, you need to find out about the 3 warning signs we spotted with Daktronics (including 2 that should not be overlooked) .
If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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