Strong week for PetIQ (NASDAQ:PETQ) shareholders doesn't alleviate pain of five-year loss

While it may not be enough for some shareholders, we think it is good to see the PetIQ, Inc. (NASDAQ:PETQ) share price up 20% in a single quarter. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 51% in the period. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.

On a more encouraging note the company has added US$40m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for PetIQ

PetIQ 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.

Over five years, PetIQ grew its revenue at 19% per year. That's better than most loss-making companies. Unfortunately for shareholders the share price has dropped 9% per year - disappointing considering the growth. It's safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for PetIQ in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that PetIQ shareholders are down 48% for the year. Unfortunately, that's worse than the broader market decline of 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand PetIQ better, we need to consider many other factors. Even so, be aware that PetIQ is showing 1 warning sign in our investment analysis , you should know about...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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.