While it may not be enough for some shareholders, we think it is good to see the Groupon, Inc. (NASDAQ:GRPN) share price up 18% in a single quarter. But that doesn’t change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 57% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.
Because Groupon 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Groupon reduced its trailing twelve month revenue by 0.7% for each year. That’s not what investors generally want to see. The share price decline of 15% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. We don’t think anyone is rushing to buy this stock. Ultimately, it may be worth watching – should revenue pick up, the share price might follow.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Groupon is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Groupon shareholders are down 24% for the year, but the market itself is up 7.9%. 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 15% 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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.
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