Investing in stocks comes with the risk that the share price will fall. And unfortunately for Shelf Drilling, Ltd. (OB:SHLF) shareholders, the stock is a lot lower today than it was a year ago. To wit the share price is down 68% in that time. Shelf Drilling may have better days ahead, of course; we've only looked at a one year period. Furthermore, it's down 36% in about a quarter. That's not much fun for holders.
Shelf Drilling 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. 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 year Shelf Drilling saw its revenue grow by 2.5%. That's not a very high growth rate considering it doesn't make profits. It's likely this muted growth has contributed to the share price decline of 68% in the last year. We'd want to see evidence that future revenue growth will be stronger before getting too interested. When a stock falls hard like this, it can signal an over-reaction. Our preference is to wait for a fundamental improvements before buying, but now could be a good time for some research.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Given that the market gained 0.9% in the last year, Shelf Drilling shareholders might be miffed that they lost 68%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 36%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.