The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of InvestSMART Group Limited (ASX:INV) have had an unfortunate run in the last three years. So they might be feeling emotional about the 66% share price collapse, in that time. The more recent news is of little comfort, with the share price down 62% in a year.
Given that InvestSMART Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, InvestSMART Group's revenue dropped 9.0% per year. That's not what investors generally want to see. The share price decline of 30% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
The last twelve months weren't great for InvestSMART Group shares, which cost holders 62%, while the market was up about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 30% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before spending more time on InvestSMART Group it might be wise to click here to see if insiders have been buying or selling shares.
But note: InvestSMART Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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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.