Source: Simply Wall Street
DETROIT, Mich.–This month, we saw the Advanced Braking Technology Limited (ASX:ABV) up an impressive 286%. But don’t envy holders — looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 66% after a long stretch. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.
Given that Advanced Braking Technology 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. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Advanced Braking Technology saw its revenue increase by 8.0% per year. That’s a pretty good rate for a long time period. The share price return isn’t so respectable with an annual loss of 20% over the period. That suggests the market is disappointed with the current growth rate. That could lead to an opportunity if the company is going to become profitable sooner rather than later.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Advanced Braking Technology’s earnings, revenue and cash flow.
Advanced Braking Technology Ltd (ABT) manufactures and distributes its award winning patented Sealed Integrated Braking System worldwide. From its head office in Perth, Western Australia, ABT is continuing to develop its brakes for sectors that have a strong requirement for safety and environmental responsibility.
Over the last 5 years, ABT has risen to become the pre-eminent supplier of fail-safe brakes for commercial vehicles used in the Australian mining sector.
A Different Perspective
Investors in Advanced Braking Technology had a tough year, with a total loss of 33%, against a market gain of about 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested.
Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 19% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Advanced Braking Technology is not the only stock that insiders are buying. For those who like to find winning investments 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 AU exchanges.
