It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Harvest Minerals Limited (LON:HMI); the share price is down a whopping 73% in the last three years. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 60% lower in that time.
Given that Harvest Minerals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.
In the last three years, Harvest Minerals saw its revenue grow by 134% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 35% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Harvest Minerals's financial health with this free report on its balance sheet.
A Different Perspective
Harvest Minerals shareholders are down 60% for the year, but the broader market is up 9.0%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 35% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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 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.
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