What Type Of Returns Would Pivotal Systems'(ASX:PVS) Shareholders Have Earned If They Purchased Their SharesYear Ago?

Pivotal Systems Corporation (ASX:PVS) shareholders should be happy to see the share price up 13% in the last week. But that doesn't change the reality of under-performance over the last twelve months. In fact, the price has declined 24% in a year, falling short of the returns you could get by investing in an index fund.

View our latest analysis for Pivotal Systems

Pivotal Systems 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Pivotal Systems grew its revenue by 1.5% over the last year. That's not a very high growth rate considering it doesn't make profits. Given this lacklustre revenue growth, the share price drop of 24% seems pretty appropriate. In a hot market it's easy to forget growth is the life-blood of a loss making company. But if you buy a loss making company then you could become a loss making investor.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While Pivotal Systems shareholders are down 24% for the year, the market itself is up 0.4%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 7.6%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. For instance, we've identified 3 warning signs for Pivotal Systems that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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