U.S. Markets closed

Did You Manage To Avoid Teekay's (NYSE:TK) Devastating 89% Share Price Drop?

Simply Wall St

Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Teekay Corporation (NYSE:TK) for five whole years - as the share price tanked 89%. There was little comfort for shareholders in the last week as the price declined a further 2.2%.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

View our latest analysis for Teekay

Teekay wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.

Over half a decade Teekay reduced its trailing twelve month revenue by 5.6% for each year. That's not what investors generally want to see. The share price fall of 35% (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. Fear of becoming a 'bagholder' may be keeping people away from this stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:TK Income Statement, January 16th 2020

This free interactive report on Teekay's balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We've already covered Teekay's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Teekay's TSR, which was a 87% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We're pleased to report that Teekay shareholders have received a total shareholder return of 41% over one year. There's no doubt those recent returns are much better than the TSR loss of 34% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Teekay better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Teekay you should be aware of, and 1 of them is potentially serious.

But note: Teekay may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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.

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. Thank you for reading.