Imagine Owning Insignia Systems (NASDAQ:ISIG) And Trying To Stomach The 72% Share Price Drop

By
Simply Wall St
Published
June 15, 2020
NasdaqCM:ISIG

While not a mind-blowing move, it is good to see that the Insignia Systems, Inc. (NASDAQ:ISIG) share price has gained 27% in the last three months. But don't envy holders -- looking back over 5 years the returns have been really bad. The share price has failed to impress anyone , down a sizable 72% during that time. So we're not so sure if the recent bounce should be celebrated. Of course, this could be the start of a turnaround.

View our latest analysis for Insignia Systems

Because Insignia Systems made a loss in the last twelve months, 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Insignia Systems saw its revenue shrink by 0.1% per year. While far from catastrophic that is not good. If a business loses money, you want it to grow, so no surprises that the share price has dropped 22% each year in that time. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. Fear of becoming a 'bagholder' may be keeping people away from this stock.

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

NasdaqCM:ISIG Income Statement June 15th 2020
NasdaqCM:ISIG Income Statement June 15th 2020

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Insignia Systems's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Insignia Systems's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Insignia Systems's TSR, at -61% is higher than its share price return of -72%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

While the broader market gained around 7.6% in the last year, Insignia Systems shareholders lost 21%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 17% 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. It's always interesting to track share price performance over the longer term. But to understand Insignia Systems better, we need to consider many other factors. For instance, we've identified 2 warning signs for Insignia Systems that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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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. 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. Thank you for reading.

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