Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the Targa Resources Corp. (NYSE:TRGP) share price managed to fall 75% over five long years. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 65% over the last twelve months. Furthermore, it's down 23% in about a quarter. That's not much fun for holders.
Given that Targa Resources 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over five years, Targa Resources grew its revenue at 7.5% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 12% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Targa Resources stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Targa Resources' TSR for the last 5 years was -62%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 13% in the last year, Targa Resources shareholders lost 63% (even including dividends). 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 10% over the last half decade. We realise that Baron Rothschild 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 business. It's always interesting to track share price performance over the longer term. But to understand Targa Resources better, we need to consider many other factors. Even so, be aware that Targa Resources is showing 3 warning signs in our investment analysis , you should know about...
We will like Targa Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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.
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