Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Anyone who held Odyssey Marine Exploration, Inc. (NASDAQ:OMEX) for five years would be nursing their metaphorical wounds since the share price dropped 75% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 40% in the last year. Furthermore, it's down 21% in about a quarter. That's not much fun for holders. 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.
Check out our latest analysis for Odyssey Marine Exploration
Because Odyssey Marine Exploration is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 Odyssey Marine Exploration saw its revenue shrink by 21% per year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 24% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The image below shows how revenue has tracked over time.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Odyssey Marine Exploration's earnings, revenue and cash flow.
A Different Perspective
Odyssey Marine Exploration shareholders are down 40% for the year, but the market itself is up 19%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 24% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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