If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Fluence Corporation Limited (ASX:FLC) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 54% drop in the share price over that period. More recently, the share price has dropped a further 22% in a month.
Because Fluence 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years, Fluence saw its revenue grow by 97% per year, compound. That is faster than most pre-profit companies. In contrast, the share price is down 23% compound, over three years - disappointing by most standards. This could mean hype has come out of the stock because the losses are concerning investors. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Fluence produced a TSR of 4.4% over the last year. It's always nice to make money but this return falls short of the market return which was about 19% for the year. The silver lining is that the recent rise is far preferable to the annual loss of 23% that shareholders have suffered over the last three years. We hope the turnaround in fortunes continues. 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 4 warning signs for Fluence (1 is a bit concerning) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned.
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