Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example, after five long years the Ecosuntek S.p.A. (BIT:ECK) share price is a whole 69% lower. We certainly feel for shareholders who bought near the top. Unhappily, the share price slid 1.3% in the last week.
We don't think that Ecosuntek's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over five years, Ecosuntek grew its revenue at 59% per year. That's well above most other pre-profit companies. In contrast, the share price is has averaged a loss of 21% per year - that's quite disappointing. It's safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Ecosuntek's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Ecosuntek had a tough year, with a total loss of 4.1%, against a market gain of about 22%. 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, longer term shareholders are suffering worse, given the loss of 21% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
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