If You Had Bought R.E.A. Holdings (LON:RE.) Stock Five Years Ago, You'd Be Sitting On A 73% Loss, Today
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding R.E.A. Holdings plc (LON:RE.) during the five years that saw its share price drop a whopping 73%. We also note that the stock has performed poorly over the last year, with the share price down 56%. Shareholders have had an even rougher run lately, with the share price down 46% in the last 90 days. Of course, this share price action may well have been influenced by the 26% decline in the broader market, throughout the period.
View our latest analysis for R.E.A. Holdings
R.E.A. Holdings 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade R.E.A. Holdings reduced its trailing twelve month revenue by 2.7% for each year. That's not what investors generally want to see. The share price fall of 23% (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. That is not really what the successful investors we know aim for.
You can see below how earnings and revenue have changed over time (discover 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.
A Different Perspective
While the broader market lost about 16% in the twelve months, R.E.A. Holdings shareholders did even worse, losing 56%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 23% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that R.E.A. Holdings is showing 6 warning signs in our investment analysis , and 2 of those are a bit unpleasant...
Of course R.E.A. Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
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