Investing in White Mountains Insurance Group (NYSE:WTM) five years ago would have delivered you a 24% gain

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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market. But White Mountains Insurance Group, Ltd. (NYSE:WTM) has fallen short of that second goal, with a share price rise of 23% over five years, which is below the market return. The last year has been disappointing, with the stock price down 11% in that time.

Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.

See our latest analysis for White Mountains Insurance Group

White Mountains Insurance Group isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect 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 White Mountains Insurance Group saw its revenue grow at 35% per year. That’s well above most pre-profit companies. It’s nice to see shareholders have made a profit, but the gain of 4% over the period isn’t that impressive compared to the overall market. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot – modest share price gains but good top line growth over the long term justifies investigation, in our book.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that White Mountains Insurance Group shareholders are down 11% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 2.8%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

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.

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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.