For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Citizens, Inc. (NYSE:CIA) shareholders have had that experience, with the share price dropping 31% in three years, versus a market return of about 41%.
Because Citizens is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, Citizens saw its revenue grow by 0.7% per year, compound. That’s not a very high growth rate considering it doesn’t make profits. The stock dropped 12% during that time. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.
Take a more thorough look at Citizens’s financial health with this free report on its balance sheet.
A Different Perspective
Citizens shareholders are down 12% for the year, but the market itself is up 3.5%. 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 1.4% over the last half decade. 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. If you would like to research Citizens in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will 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.
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 email@example.com. 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.