Nufarm (ASX:NUF shareholders incur further losses as stock declines 8.6% this week, taking one-year losses to 18%

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Nufarm Limited (ASX:NUF) have tasted that bitter downside in the last year, as the share price dropped 20%. That falls noticeably short of the market return of around 15%. However, the longer term returns haven't been so bad, with the stock down 12% in the last three years. The falls have accelerated recently, with the share price down 20% in the last three months.

With the stock having lost 8.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Nufarm

Nufarm 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 hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In just one year Nufarm saw its revenue fall by 7.8%. That's not what investors generally want to see. Shareholders have seen the share price drop 20% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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 it makes a lot of sense to check out what analysts think Nufarm will earn in the future (free profit forecasts).

A Different Perspective

Investors in Nufarm had a tough year, with a total loss of 18% (including dividends), against a market gain of about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.0% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Nufarm better, we need to consider many other factors. For instance, we've identified 1 warning sign for Nufarm that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.