Generally speaking long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the LightLab Sweden AB (STO:LLSW B) share price managed to fall 75% over five long years. That's not a lot of fun for true believers. Even worse, it's down 13% in about a month, which isn't fun at all.
LightLab Sweden isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, LightLab Sweden grew its revenue at 1.2% per year. That's far from impressive given all the money it is losing. Nonetheless, it's fair to say the rapidly declining share price (down 24%, compound, over five years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on LightLab Sweden's balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between LightLab Sweden's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. LightLab Sweden hasn't been paying dividends, but its TSR of -69% exceeds its share price return of -75%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
LightLab Sweden shareholders are up 1.2% for the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 21% per year, over five years. So this might be a sign the business has turned its fortunes around. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
We will like LightLab Sweden better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.