Some stocks are best avoided. We don’t wish catastrophic capital loss on anyone. Anyone who held Plantronics, Inc. (NYSE:PLT) for five years would be nursing their metaphorical wounds since the share price dropped 86% in that time. We also note that the stock has performed poorly over the last year, with the share price down 85%. Furthermore, it’s down 72% in about a quarter. That’s not much fun for holders.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
See our latest analysis for Plantronics
Plantronics wasn’t profitable in the last twelve months, it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Plantronics saw its revenue increase by 18% per year. That’s well above most other pre-profit companies. So it’s not at all clear to us why the share price sunk 33% throughout that time. It could be that the stock was over-hyped before. While there might be an opportunity here, you’d want to take a close look at the balance sheet strength.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Plantronics in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 14% in the twelve months, Plantronics shareholders did even worse, losing 85% (even including dividends) . Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 32% 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. 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. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Plantronics (of which 1 can’t be ignored!) you should know about.
Plantronics is not the only stock that insiders are buying. 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 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.
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