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. We don’t wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Siem Offshore Inc. (OB:SIOFF) during the five years that saw its share price drop a whopping 83%. Furthermore, it’s down 11% in about a quarter. That’s not much fun for holders. Of course, this share price action may well have been influenced by the 4.7% decline in the broader market, throughout the period.
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.
Siem Offshore isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Siem Offshore reduced its trailing twelve month revenue by 6.2% for each year. That’s not what investors generally want to see. If a business loses money, you want it to grow, so no surprises that the share price has dropped 29% each year in that time. We’re generally averse to companies with declining revenues, but we’re not alone in that. Fear of becoming a ‘bagholder’ may be keeping people away from this stock.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market lost about 1.5% in the twelve months, Siem Offshore shareholders did even worse, losing 20%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. However, the loss over the last year isn’t as bad as the 29% per annum loss investors have suffered over the last half decade. 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.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO 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 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.