Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held U.S. Energy Corp. (NASDAQ:USEG) for five whole years – as the share price tanked 97%. And we doubt long term believers are the only worried holders, since the stock price has declined 38% over the last twelve months. Even worse, it’s down 14% in about a month, which isn’t fun at all.
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.
Check out our latest analysis for U.S. Energy
Because U.S. Energy is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade U.S. Energy reduced its trailing twelve month revenue by 44% 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 50% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at U.S. Energy’s financial health with this free report on its balance sheet.
A Different Perspective
U.S. Energy shareholders are down 38% for the year, but the market itself is up 2.6%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 50% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of U.S. Energy’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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.
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.
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. Thank you for reading.