Investing in stocks comes with the risk that the share price will fall. And unfortunately for Electro Optic Systems Holdings Limited (ASX:EOS) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 62% in that time. However, the longer term returns haven't been so bad, with the stock down 29% in the last three years. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days.
With the stock having lost 10% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Because Electro Optic Systems Holdings 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Electro Optic Systems Holdings increased its revenue by 10%. That's not a very high growth rate considering it doesn't make profits. It's likely this muted growth has contributed to the share price decline of 62% in the last year. Like many holders, we really want to see better revenue growth in companies that lose money. Of course, the market can be too impatient at times. Why not take a closer look at this one so you're ready to pounce if growth does accelerate.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Electro Optic Systems Holdings in this interactive graph of future profit estimates.
A Different Perspective
Electro Optic Systems Holdings shareholders are down 62% for the year, but the market itself is up 9.7%. 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 0.4% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Electro Optic Systems Holdings .
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.