Long term investing works well, but it doesn’t always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Trek 2000 International Ltd (SGX:5AB) for five years would be nursing their metaphorical wounds since the share price dropped 83% in that time. We also note that the stock has performed poorly over the last year, with the share price down 26%. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Trek 2000 International isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years Trek 2000 International saw its revenue shrink by 17% per year. That’s definitely a weaker result than most pre-profit companies report. So it’s not that strange that the share price dropped 30% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
You can see below how earnings and revenue have changed over time.
If you are thinking of buying or selling Trek 2000 International stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 9.2% in the last year, Trek 2000 International shareholders lost 26%. 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, longer term shareholders are suffering worse, given the loss of 28% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Trek 2000 International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.