Statistically speaking, long term investing is a profitable endeavour. But that doesn’t mean long term investors can avoid big losses. Zooming in on an example, the Touchstar plc (LON:TST) share price dropped 54% in the last half decade. That is extremely sub-optimal, to say the least.
Because Touchstar is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Over half a decade Touchstar reduced its trailing twelve month revenue by 6.4% for each year. While far from catastrophic that is not good. The share price decline of 14% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. We don’t think anyone is rushing to buy this stock. Not that many investors like to invest in companies that are losing money and not growing revenue.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Touchstar shareholders are down 12% for the year, but the market itself is up 12%. 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 14% 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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 GB exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.