NOW Inc. (NYSE:DNOW) shareholders will doubtless be very grateful to see the share price up 67% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 41% in that half decade.
Because NOW made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. 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 NOW reduced its trailing twelve month revenue by 0.3% for each year. That's not what investors generally want to see. The share price decline at a rate of 7% per year is disappointing. But it doesn't surprise given the falling revenue. It might be worth watching for signs of a turnaround - buyers are probably expecting one.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on NOW's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in NOW had a tough year, with a total loss of 1.7%, against a market gain of about 32%. 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 7% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 - NOW has 1 warning sign we think you should be aware of.
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 US exchanges.
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