Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don’t succeed. Zooming in on an example, the Liquidity Services, Inc. (NASDAQ:LQDT) share price dropped 51% in the last half decade. That’s an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 29%. Furthermore, it’s down 27% in about a quarter. That’s not much fun for holders. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
Because Liquidity Services made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Liquidity Services reduced its trailing twelve month revenue by 17% for each year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 13% annually during that time. It’s fair to say most investors don’t like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Liquidity Services’s financial health with this free report on its balance sheet.
A Different Perspective
While the broader market gained around 23% in the last year, Liquidity Services shareholders lost 29%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 3 warning signs we’ve spotted with Liquidity Services .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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