Digital Wine Ventures Limited (ASX:DW8) shareholders might be concerned after seeing the share price drop 25% in the last quarter. But that doesn't displace its brilliant performance over three years. Over that time, we've been excited to watch the share price climb an impressive 733%. As long term investors the recent fall doesn't detract all that much from the longer term story. The thing to consider is whether there is still too much elation around the company's prospects. It really delights us to see such great share price performance for investors.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Given that Digital Wine Ventures 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 3 years Digital Wine Ventures saw its revenue grow at 103% per year. That's well above most pre-profit companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 103% per year, over the same period. Despite the strong run, top performers like Digital Wine Ventures have been known to go on winning for decades. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We've already covered Digital Wine Ventures' 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. We note that Digital Wine Ventures' TSR, at 739% is higher than its share price return of 733%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Over the last year Digital Wine Ventures shareholders have received a TSR of 8.7%. It's always nice to make money but this return falls short of the market return which was about 19% for the year. At least the longer term returns (running at about 103% a year, are better. Even the best companies don't see strong share price performance every year. 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. Case in point: We've spotted 6 warning signs for Digital Wine Ventures you should be aware of, and 2 of them are a bit unpleasant.
Of course Digital Wine Ventures 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 AU 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.