Imagine Owning United Food Holdings (SGX:AZR) And Trying To Stomach The 92% Share Price Drop

United Food Holdings Limited (SGX:AZR) shareholders should be happy to see the share price up 11% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 92%. While the recent increase might be a green shoot, we’re certainly hesitant to rejoice. The fundamental business performance will ultimately determine if the turnaround can be sustained.

While a drop like that is definitely a body blow, money isn’t as important as health and happiness.

See our latest analysis for United Food Holdings

United Food Holdings 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 half a decade United Food Holdings reduced its trailing twelve month revenue by 76% for each year. That puts it in an unattractive cohort, to put it mildly. So it’s not altogether surprising to see the share price down 40% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

SGX:AZR Income Statement, January 16th 2020
SGX:AZR Income Statement, January 16th 2020

Take a more thorough look at United Food Holdings’s financial health with this free report on its balance sheet.

A Different Perspective

Investors in United Food Holdings had a tough year, with a total loss of 71%, against a market gain of about 6.3%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 40% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand United Food Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for United Food Holdings (of which 2 are significant!) you should know about.

We will like United Food Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies 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 SG 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.