Even after rising 11% this past week, Surgalign Holdings (NASDAQ:SRGA) shareholders are still down 77% over the past three years

By
Simply Wall St
Published
November 07, 2021
NasdaqGS:SRGA
Source: Shutterstock

Surgalign Holdings, Inc. (NASDAQ:SRGA) shareholders should be happy to see the share price up 17% in the last quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 77% in that time. So we're relieved for long term holders to see a bit of uplift. The thing to think about is whether the business has really turned around.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Surgalign Holdings

Surgalign Holdings 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years Surgalign Holdings saw its revenue shrink by 39% per year. That's definitely a weaker result than most pre-profit companies report. And as you might expect the share price has been weak too, dropping at a rate of 21% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

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

earnings-and-revenue-growth
NasdaqGS:SRGA Earnings and Revenue Growth November 8th 2021

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Surgalign Holdings will earn in the future (free profit forecasts).

A Different Perspective

Investors in Surgalign Holdings had a tough year, with a total loss of 41%, against a market gain of about 34%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% 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 Surgalign Holdings better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Surgalign Holdings you should be aware of, and 1 of them is concerning.

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.

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