Titan International, Inc. (NYSE:TWI) shareholders have seen the share price descend 12% over the month. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 470%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 38% in the last three years.
In light of the stock dropping 9.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
Titan International wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last 5 years Titan International saw its revenue grow at 7.6% per year. That's a fairly respectable growth rate. Arguably it's more than reflected in the very strong share price gain of 42% a year over a half a decade. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Titan International's financial health with this free report on its balance sheet.
A Different Perspective
Titan International shareholders are up 6.5% for the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 42% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Take risks, for example - Titan International has 1 warning sign we think you should be aware of.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.