Did Changing Sentiment Drive PICO Holdings’s Share Price Down A Worrying 58%?

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While not a mind-blowing move, it is good to see that the PICO Holdings, Inc. (NASDAQ:PICO) share price has gained 10% in the last three months. But over the last half decade, the stock has not performed well. In fact, the share price is down 58%, which falls well short of the return you could get by buying an index fund.

See our latest analysis for PICO Holdings

PICO Holdings isn’t a profitable company, so 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 yet 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.

Over half a decade PICO Holdings reduced its trailing twelve month revenue by 47% for each year. That’s definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 16% (annualized) in the same time period. We don’t generally like to own companies that lose money and don’t grow revenues. You might be better off spending your money on a leisure activity. You’d want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

NasdaqGS:PICO Income Statement, February 22nd 2019
NasdaqGS:PICO Income Statement, February 22nd 2019

This free interactive report on PICO Holdings’s balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there’s a difference between PICO Holdings’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings. PICO Holdings hasn’t been paying dividends, but its TSR of -41% exceeds its share price return of -58%, implying it has raised capital at a discount.

A Different Perspective

Investors in PICO Holdings had a tough year, with a total loss of 12%, against a market gain of about 3.1%. 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 10% 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 would like to research PICO Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

But note: PICO Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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. Thank you for reading.