It is a pleasure to report that the Mitcham Industries, Inc. (NASDAQ:MIND) is up 41% in the last quarter. But don’t envy holders — looking back over 5 years the returns have been really bad. Indeed, the share price is down 56% in the period. So we’re not so sure if the recent bounce should be celebrated. We’d err towards caution given the long term under-performance.
Because Mitcham Industries 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 Mitcham Industries reduced its trailing twelve month revenue by 14% for each year. That’s definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 15% annually during that time. We don’t generally like to own companies that lose money and don’t grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Mitcham Industries stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Mitcham Industries had a tough year, with a total loss of 22%, against a market gain of about 24%. 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 15% 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 Mitcham Industries better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we’ve spotted with Mitcham Industries (including 1 which is is potentially serious) .
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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