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If You Had Bought TrueCar (NASDAQ:TRUE) Stock Five Years Ago, You'd Be Sitting On A 76% Loss, Today

Simply Wall St

This month, we saw the TrueCar, Inc. (NASDAQ:TRUE) up an impressive 41%. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 76%. The recent bounce might mean the long decline is over, but we are not confident. The million dollar question is whether the company can justify a long term recovery.

See our latest analysis for TrueCar

Because TrueCar is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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, TrueCar grew its revenue at 11% per year. That's a pretty good rate for a long time period. So it is unexpected to see the stock down 25% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqGS:TRUE Income Statement, November 22nd 2019

TrueCar is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

Investors in TrueCar had a tough year, with a total loss of 54%, against a market gain of about 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 25% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course TrueCar 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 US 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.

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. Thank you for reading.