Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example, after five long years the SeaChange International, Inc. (NASDAQ:SEAC) share price is a whole 67% lower. That's not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 46% in the last year. The silver lining is that the stock is up 1.8% in about a week.
Given that SeaChange International didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade SeaChange International reduced its trailing twelve month revenue by 17% for each year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 11% annually during that time. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling SeaChange International stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Investors in SeaChange International had a tough year, with a total loss of 46%, against a market gain of about 47%. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with SeaChange International (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
SeaChange International is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you’re looking to trade SeaChange International, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.