While it may not be enough for some shareholders, we think it is good to see the Dril-Quip, Inc. (NYSE:DRQ) share price up 20% in a single quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. Indeed, the share price is down 52% in the period. So we're hesitant to put much weight behind the short term increase. But it could be that the fall was overdone.
Given that Dril-Quip 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last five years Dril-Quip 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 14% (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. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Dril-Quip is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market gained around 2.4% in the last year, Dril-Quip shareholders lost 7.6%. 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. However, the loss over the last year isn't as bad as the 14% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of Dril-Quip's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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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