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Tiptree's (NASDAQ:TIPT) Shareholders Are Down 32% On Their Shares

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Tiptree Inc. (NASDAQ:TIPT) shareholders over the last year, as the share price declined 32%. That's well below the market return of 15%. However, the longer term returns haven't been so bad, with the stock down 20% in the last three years. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.

See our latest analysis for Tiptree

Tiptree isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Tiptree grew its revenue by 4.9% over the last year. While that may seem decent it isn't great considering the company is still making a loss. Given this lacklustre revenue growth, the share price drop of 32% seems pretty appropriate. It's important not to lose sight of the fact that profitless companies must grow. But if you buy a loss making company then you could become a loss making investor.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

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. Dive deeper into the earnings by checking this interactive graph of Tiptree's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Tiptree's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Tiptree shareholders, and that cash payout explains why its total shareholder loss of 30%, over the last year, isn't as bad as the share price return.

A Different Perspective

Tiptree shareholders are down 30% for the year (even including dividends), but the market itself is up 15%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4.0% per year over five years. 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 Tiptree better, we need to consider many other factors. For instance, we've identified 3 warning signs for Tiptree (1 is significant) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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