Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. Anyone who held Fluence Corporation Limited (ASX:FLC) for five years would be nursing their metaphorical wounds since the share price dropped 83% in that time. The last week also saw the share price slip down another 10.0%. 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.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Fluence 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Fluence saw its revenue increase by 39% per year. That's better than most loss-making companies. So it's not at all clear to us why the share price sunk 13% throughout that time. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Fluence's financial health with this free report on its balance sheet.
A Different Perspective
Fluence shareholders are down 14% for the year, but the market itself is up 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 13% 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. It's always interesting to track share price performance over the longer term. But to understand Fluence better, we need to consider many other factors. Even so, be aware that Fluence is showing 2 warning signs in our investment analysis , you should know about...
Of course Fluence may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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