Market is not liking Snowman Logistics' (NSE:SNOWMAN) earnings decline as stock retreats 10% this week

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Snowman Logistics Limited (NSE:SNOWMAN) have tasted that bitter downside in the last year, as the share price dropped 30%. That's well below the market return of 2.4%. On the bright side, the stock is actually up 21% in the last three years. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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While Snowman Logistics made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last twelve months, Snowman Logistics increased its revenue by 9.8%. 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 30% in a year. It's important not to lose sight of the fact that profitless companies must grow. But if you buy a loss making company then you could become a loss making investor.

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 Snowman Logistics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 2.4% in the last year, Snowman Logistics shareholders lost 30% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Snowman Logistics better, we need to consider many other factors. Even so, be aware that Snowman Logistics is showing 4 warning signs in our investment analysis , you should know about...

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.