There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the ADT Inc. (NYSE:ADT) share price is up 15% in the last year, that falls short of the market return. Zooming out, the stock is actually down 9.3% in the last three years.

Although ADT has shed US$206m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

We don't think that ADT's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

ADT grew its revenue by 7.1% last year. That's not a very high growth rate considering it doesn't make profits. It's probably fair to say that the modest growth is reflected in the modest share price gain of 15%. It might be worth thinking about how long it will take the company to turn a profit.

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

It is of course excellent to see how ADT has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling ADT stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for ADT the TSR over the last 1 year was 18%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

ADT shareholders are up 18% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 0.3% per year over five year. This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 4 warning signs for ADT (1 can't be ignored) that you should be aware of.

We will like ADT better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.