Dawson Geophysical Company (NASDAQ:DWSN) shareholders will doubtless be very grateful to see the share price up 34% in the last month. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 74%. The recent bounce might mean the long decline is over, but we are not confident. The real question is whether the business can leave its past behind and improve itself over the years ahead.
Because Dawson Geophysical made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Over half a decade Dawson Geophysical reduced its trailing twelve month revenue by 10% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 23% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Dawson Geophysical's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Dawson Geophysical had a tough year, with a total loss of 39%, against a market gain of about 5.5%. 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 23% over the last half decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Dawson Geophysical that you should be aware of.
But note: Dawson Geophysical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.