Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Takween Advanced Industries (TADAWUL:1201) for five whole years – as the share price tanked 91%. The falls have accelerated recently, with the share price down 24% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Takween Advanced Industries 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years Takween Advanced Industries saw its revenue shrink by 3.7% per year. That’s not what investors generally want to see. The share price fall of 38% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn’t grow revenue. That is not really what the successful investors we know aim for.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Takween Advanced Industries’s earnings, revenue and cash flow.
A Different Perspective
The total return of 15% received by Takween Advanced Industries shareholders over the last year isn’t far from the market return of -15%. Worse still, the company has lost shareholders 38% per year over five years. Generally speaking we’d prefer see an improvement in the fundamental metrics before becoming enthusiastic about the stock. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Takween Advanced Industries (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SA exchanges.
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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. 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. Thank you for reading.