Cray Inc. (NASDAQ:CRAY) shareholders should be happy to see the share price up 30% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 30% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
Given that Cray 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years Cray saw its revenue shrink by 19% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 11% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's nice to see that Cray shareholders have received a total shareholder return of 21% over the last year. There's no doubt those recent returns are much better than the TSR loss of 3.4% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Cray 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 US 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.