Flotek Industries (NYSE:FTK) investors are sitting on a loss of 78% if they invested five years ago
This month, we saw the Flotek Industries, Inc. (NYSE:FTK) up an impressive 33%. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. In fact, the share price has tumbled down a mountain to land 78% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Flotek Industries
Flotek Industries 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
Over half a decade Flotek Industries reduced its trailing twelve month revenue by 39% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 12% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Flotek Industries' earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 8.9% in the twelve months, Flotek Industries shareholders did even worse, losing 22%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, longer term shareholders are suffering worse, given the loss of 12% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Flotek Industries better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Flotek Industries you should be aware of, and 2 of them make us uncomfortable.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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