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It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held Source Energy Services Ltd. (TSE:SHLE) during the last year don't lose the lesson, in addition to the 87% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. Source Energy Services may have better days ahead, of course; we've only looked at a one year period. The falls have accelerated recently, with the share price down 56% in the last three months.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Given that Source Energy Services 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 year Source Energy Services saw its revenue grow by 26%. We think that is pretty nice growth. Unfortunately, the market wanted something better, given it sent the share price 87% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. We'd posit that the future looks challenging, given the disconnect between revenue growth and the share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Source Energy Services will earn in the future (free profit forecasts).
A Different Perspective
Given that the market gained 0.3% in the last year, Source Energy Services shareholders might be miffed that they lost 87%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 56% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Source Energy Services is not the only stock that insiders are buying. 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 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 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.