Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So spare a thought for the long term shareholders of SmileDirectClub, Inc. (NASDAQ:SDC); the share price is down a whopping 82% in the last twelve months. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn't rush to judgement on SmileDirectClub because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 63% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
SmileDirectClub wasn't profitable in the last twelve months, 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, SmileDirectClub increased its revenue by 4.0%. While that may seem decent it isn't great considering the company is still making a loss. Even so you could argue that it's surprising that the share price has tanked 82%. We'd venture this growth was too low to give holders confidence that profitability is on the horizon. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. If you are thinking of buying or selling SmileDirectClub stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While SmileDirectClub shareholders are down 82% for the year, the market itself is up 5.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 63%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand SmileDirectClub better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for SmileDirectClub you should be aware of, and 1 of them makes us a bit uncomfortable.
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 US exchanges.
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.