We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Rubicon Technology, Inc. (NASDAQ:RBCN) during the five years that saw its share price drop a whopping 79%. The good news is that the stock is up 2.2% in the last week.
Because Rubicon Technology 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. Shareholders of unprofitable companies usually expect strong 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 Rubicon Technology saw its revenue shrink by 50% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 27% 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 below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Rubicon Technology stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that Rubicon Technology shareholders have received a total shareholder return of 5.3% over the last year. That certainly beats the loss of about 27% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 risks, for instance. Every company has them, and we've spotted 3 warning signs for Rubicon Technology you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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