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It’s not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. It must have been painful to be a Source Energy Services Ltd. (TSE:SHLE) shareholder over the last year, since the stock price plummeted 81% in that time. That’d be enough to make even the strongest stomachs churn. Source Energy Services may have better days ahead, of course; we’ve only looked at a one year period. Even worse, it’s down 17% in about a month, which isn’t fun at all.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Because Source Energy Services is loss-making, 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. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last year Source Energy Services saw its revenue grow by 26%. That’s definitely a respectable growth rate. Unfortunately, the market wanted something better, given it sent the share price 81% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. We’d posit that the future looks challenging, given the disconnect between revenue growth and the share price.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Source Energy Services will earn in the future (free profit forecasts).
A Different Perspective
While Source Energy Services shareholders are down 81% for the year, the market itself is up 0.7%. 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. With the stock down 2.0% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Source Energy Services by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.