If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term TruScreen Limited (NZSE:TRU) shareholders. Regrettably, they have had to cope with a 57% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 46% in the last year. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.
TruScreen 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. When a company doesn't make profits, we'd generally expect to see good 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 three years, TruScreen saw its revenue grow by 34% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 24% over that time, a bad result. It seems likely that the market is worried about the continual losses. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
TruScreen shareholders are down 46% for the year, but the market itself is up 0.2%. 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 14% 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. It's always interesting to track share price performance over the longer term. But to understand TruScreen better, we need to consider many other factors. For example, we've discovered 7 warning signs for TruScreen (2 shouldn't be ignored!) that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ exchanges.
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.
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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