If you love investing in stocks you’re bound to buy some losers. But the long term shareholders of Sportech PLC (LON:SPO) have had an unfortunate run in the last three years. Sadly for them, the share price is down 66% in that time.
Sportech 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. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years Sportech saw its revenue shrink by 5.5% per year. That is not a good result. The share price decline of 31% compound, over three years, is understandable given the company doesn’t have profits to boast of, and revenue is moving in the wrong direction. Of course, it’s the future that will determine whether today’s price is a good one. We don’t generally like to own companies that lose money and can’t grow revenues. But any company is worth looking at when it makes a maiden profit.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Sportech stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Sportech’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Sportech hasn’t been paying dividends, but its TSR of -54% exceeds its share price return of -66%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Investors in Sportech had a tough year, with a total loss of 9.7%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7.5% over the last half decade. 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. It’s always interesting to track share price performance over the longer term. But to understand Sportech better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Sportech you should be aware of, and 1 of them doesn’t sit too well with us.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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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