As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So spare a thought for the long term shareholders of Turbon AG (FRA:TUR); the share price is down a whopping 79% in the last three years. That’d be enough to cause even the strongest minds some disquiet. It’s up 2.6% in the last seven days.
See our latest analysis for Turbon
Turbon 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.
Over the last three years, Turbon’s revenue dropped 20% per year. That’s definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 40%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It’s worth remembering that investors call buying a steeply falling share price ‘catching a falling knife’ because it is a dangerous pass time.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Turbon’s total shareholder return (TSR) and its share price return. 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. Turbon’s TSR of was a loss of 78% for the 3 years. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
Turbon shareholders gained a total return of 14% during the year. But that was short of the market average. On the bright side, that’s still a gain, and it is certainly better than the yearly loss of about 22% endured over half a decade. It could well be that the business is stabilizing. 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 example, we’ve discovered 3 warning signs for Turbon (2 are a bit concerning!) that you should be aware of before investing here.
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 DE exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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. Thank you for reading.