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Did Changing Sentiment Drive Touax's (EPA:TOUP) Share Price Down A Worrying 66%?

Simply Wall St

Touax SCA (EPA:TOUP) shareholders should be happy to see the share price up 10% in the last month. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 66% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

View our latest analysis for Touax

Given that Touax 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Touax saw its revenue shrink by 22% per year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 19% (annualized) in the same time period. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

ENXTPA:TOUP Income Statement, October 16th 2019

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Investors in Touax had a tough year, with a total loss of 30%, against a market gain of about 13%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 19% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Touax may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR 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.