If You Had Bought Saipem (BIT:SPM) Stock Five Years Ago, You'd Be Sitting On A 98% Loss, Today

June 20, 2019
  •  Updated
November 29, 2022
BIT:SPM
Source: Shutterstock

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Saipem S.p.A. (BIT:SPM) for half a decade as the share price tanked 98%. The silver lining is that the stock is up 6.2% in about a week.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

See our latest analysis for Saipem

Because Saipem 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 Saipem reduced its trailing twelve month revenue by 9.8% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 53% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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.

BIT:SPM Income Statement, June 21st 2019
BIT:SPM Income Statement, June 21st 2019

Saipem is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Saipem stock, you should check out this free report showing analyst consensus estimates for future profits.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Saipem's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Saipem hasn't been paying dividends, but its TSR of -82% exceeds its share price return of -98%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

We're pleased to report that Saipem shareholders have received a total shareholder return of 22% over one year. Notably the five-year annualised TSR loss of 29% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course Saipem 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 IT exchanges.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.