A Look At Purplebricks Group's (LON:PURP) Share Price Returns

It is a pleasure to report that the Purplebricks Group plc (LON:PURP) is up 50% in the last quarter. But only the myopic could ignore the astounding decline over three years. To wit, the share price sky-dived 81% in that time. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

View our latest analysis for Purplebricks Group

Because Purplebricks Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 three years, Purplebricks Group saw its revenue grow by 28% per year, compound. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 22% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Purplebricks Group will earn in the future (free profit forecasts).

A Different Perspective

The last twelve months weren't great for Purplebricks Group shares, which performed worse than the market, costing holders 38%. The market shed around 10%, no doubt weighing on the stock price. However, the loss over the last year isn't as bad as the 22% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Purplebricks Group has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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