Long term investing works well, but it doesn’t always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held MySale Group plc (LON:MYSL) for five years would be nursing their metaphorical wounds since the share price dropped 90% in that time. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.
Given that MySale 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. 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.
Over half a decade MySale Group reduced its trailing twelve month revenue by 17% for each year. That’s definitely a weaker result than most pre-profit companies report. So it’s not that strange that the share price dropped 14% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling MySale Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
MySale Group shareholders are down 13% for the year, but the market itself is up 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 14% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 4 warning signs with MySale Group (at least 1 which shouldn’t be ignored) , and understanding them should be part of your investment process.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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