Generally speaking long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. Zooming in on an example, the Barnwell Industries, Inc. (NYSEMKT:BRN) share price dropped 59% in the last half decade. That is extremely sub-optimal, to say the least. And some of the more recent buyers are probably worried, too, with the stock falling 33% in the last year. There was little comfort for shareholders in the last week as the price declined a further 3.0%.
Barnwell Industries isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 five years Barnwell Industries saw its revenue shrink by 23% per year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 16% annually during that time. It’s fair to say most investors don’t like to invest in loss making companies with falling revenue. You’d want to research this company pretty thoroughly before buying, it looks a bit too risky for us.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Investors in Barnwell Industries had a tough year, with a total loss of 33%, against a market gain of about 9.9%. 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 16% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.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 firstname.lastname@example.org. 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.