Further weakness as BGSF (NYSE:BGSF) drops 13% this week, taking five-year losses to 70%

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Anyone who held BGSF, Inc. (NYSE:BGSF) 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 44% in the last year. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days.

Since BGSF has shed US$8.4m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for BGSF

BGSF isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 half decade, BGSF saw its revenue increase by 5.1% per year. That's far from impressive given all the money it is losing. Nonetheless, it's fair to say the rapidly declining share price (down 12%, compound, over five years) suggests the market is very disappointed with this level of growth. We'd be pretty cautious about this one, although the sell-off may be too severe. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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. So we recommend checking out this free report showing consensus forecasts

What About The Total Shareholder Return (TSR)?

We've already covered BGSF's share price action, but we should also mention its total shareholder return (TSR). 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 and spin-offs. BGSF's TSR of was a loss of 70% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in BGSF had a tough year, with a total loss of 43%, against a market gain of about 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild 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 business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for BGSF (1 is significant) that you should be aware of.

BGSF is not the only stock that insiders are buying. For those who like to find lesser know companies 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 American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.