We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the Sierra Wireless, Inc. (TSE:SW) share price dropped 52% in the last half decade. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 41% over the last twelve months. The good news is that the stock is up 3.2% in the last week.
Sierra Wireless isn’t a profitable company, so 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. When a company doesn’t make profits, we’d generally expect to see good revenue growth. 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 five years, Sierra Wireless grew its revenue at 8.5% per year. That’s a fairly respectable growth rate. The share price return isn’t so respectable with an annual loss of 14% over the period. It seems probably that the business has failed to live up to initial expectations. A pessimistic market can create opportunities.
The graphic below depicts how revenue has changed over time.
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market gained around 7.3% in the last year, Sierra Wireless shareholders lost 41%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 14% 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 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. Thank you for reading.