We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the Heliospectra AB (publ) (STO:HELIO) share price dropped 64% in the last half decade. That's an unpleasant experience for long term holders. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Given that Heliospectra didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Heliospectra saw its revenue increase by 32% per year. That's better than most loss-making companies. In contrast, the share price is has averaged a loss of 18% per year - that's quite disappointing. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Heliospectra'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. We note that Heliospectra's TSR, at -55% is higher than its share price return of -64%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Investors in Heliospectra had a tough year, with a total loss of 4.6%, against a market gain of about 5.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 15% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Take risks, for example - Heliospectra has 5 warning signs we think you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
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