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Did Changing Sentiment Drive Calfrac Well Services's (TSE:CFW) Share Price Down A Painful 92%?

Simply Wall St

This week we saw the Calfrac Well Services Ltd. (TSE:CFW) share price climb by 15%. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 92% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Check out our latest analysis for Calfrac Well Services

Because Calfrac Well Services is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 five years Calfrac Well Services saw its revenue shrink by 1.6% per year. While far from catastrophic that is not good. The share price fall of 39% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. That is not really what the successful investors we know aim for.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

TSX:CFW Income Statement, September 3rd 2019

Calfrac Well Services is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Calfrac Well Services in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 0.5% in the last year, Calfrac Well Services shareholders lost 69%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 39% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 editorial-team@simplywallst.com. 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.