Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding TransEnterix, Inc. (NYSEMKT:TRXC) during the five years that saw its share price drop a whopping 73%. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Because TransEnterix is loss-making, 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. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, TransEnterix saw its revenue increase by 64% per year. That’s well above most other pre-profit companies. So it’s not at all clear to us why the share price sunk 23% throughout that time. It could be that the stock was over-hyped before. While there might be an opportunity here, you’d want to take a close look at the balance sheet strength.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It’s good to see that TransEnterix has rewarded shareholders with a total shareholder return of 42% in the last twelve months. That certainly beats the loss of about 23% 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. If you would like to research TransEnterix in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 US exchanges.
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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.