We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Global Offshore Services Limited (NSE:GLOBOFFS) during the five years that saw its share price drop a whopping 99%. And it's not just long term holders hurting, because the stock is down 63% in the last year. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Global Offshore Services 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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 five years Global Offshore Services saw its revenue shrink by 25% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 63% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Global Offshore Services stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Global Offshore Services had a tough year, with a total loss of 63%, against a market gain of about 5.5%. 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 63% 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. You could get a better understanding of Global Offshore Services's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Global Offshore Services better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN 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.
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