Did Changing Sentiment Drive Matrix Composites & Engineering's (ASX:MCE) Share Price Down A Painful 71%?

Simply Wall St

Matrix Composites & Engineering Ltd (ASX:MCE) shareholders should be happy to see the share price up 10% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 71% during that time. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround.

Check out our latest analysis for Matrix Composites & Engineering

Given that Matrix Composites & Engineering 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. 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 Matrix Composites & Engineering saw its revenue shrink by 39% per year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 22% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

ASX:MCE Income Statement, April 15th 2019

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Matrix Composites & Engineering will earn in the future (free profit forecasts)

A Different Perspective

Investors in Matrix Composites & Engineering had a tough year, with a total loss of 16%, against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 21% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Matrix Composites & Engineering is not the only stock that insiders are buying. 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 AU 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 editorial-team@simplywallst.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.