If You Had Bought Connected IO (ASX:CIO) Stock Five Years Ago, You'd Be Sitting On A 94% Loss, Today
It is doubtless a positive to see that the Connected IO Limited (ASX:CIO) share price has gained some 100% in the last three months. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 94% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The fundamental business performance will ultimately determine if the turnaround can be sustained.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Check out our latest analysis for Connected IO
Connected IO isn't a profitable company, so 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, Connected IO grew its revenue at 60% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 44% each year, in the same time period. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We've already covered Connected IO's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Connected IO's TSR, at -94% is higher than its share price return of -94%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
We're pleased to report that Connected IO 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 43% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you would like to research Connected IO in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Connected IO better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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 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. Thank you for reading.
