Empire Industries Ltd. (CVE:EIL) shareholders should be happy to see the share price up 27% in the last month. But that doesn’t change the fact that the returns over the last year have been less than pleasing. After all, the share price is down 26% in the last year, significantly under-performing the market.
Empire Industries isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, Empire Industries increased its revenue by 5.7%. While that may seem decent it isn’t great considering the company is still making a loss. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 26% in a year. In a hot market it’s easy to forget growth is the life-blood of a loss making company. So remember, if you buy a profitless company then you risk being a profitless investor.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
If you are thinking of buying or selling Empire Industries stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 4.3% in the last year, Empire Industries shareholders lost 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2.8% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course Empire Industries 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 CA exchanges.
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