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While it may not be enough for some shareholders, we think it is good to see the ArborGen Holdings Limited (NZSE:ARB) share price up 19% in a single quarter. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 38% in that half decade.
ArborGen Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. 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 five years ArborGen Holdings saw its revenue shrink by 37% per year. That puts it in an unattractive cohort, to put it mildly. It seems pretty reasonable to us that the share price dipped 9.2% per year in that time. This loss means the stock shareholders are probably pretty annoyed. Risk averse investors probably wouldn't like this one much.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at ArborGen Holdings's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market gained around 6.0% in the last year, ArborGen Holdings shareholders lost 2.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 9.2% 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's always interesting to track share price performance over the longer term. But to understand ArborGen Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with ArborGen Holdings (at least 1 which is significant) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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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