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Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example, after five long years the O2Micro International Limited (NASDAQ:OIIM) share price is a whole 58% lower. That’s not a lot of fun for true believers. The silver lining is that the stock is up 4.2% in about a week.
O2Micro International 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 five years O2Micro International saw its revenue shrink by 1.9% per year. That’s not what investors generally want to see. The share price decline of 16% 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.
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
O2Micro International shareholders are down 19% for the year, but the market itself is up 7.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 16% 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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.
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 firstname.lastname@example.org. 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.