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Imagine Owning Green Plains (NASDAQ:GPRE) While The Price Tanked 52%

Simply Wall St
·3 mins read

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Green Plains Inc. (NASDAQ:GPRE) shareholders for doubting their decision to hold, with the stock down 52% over a half decade. More recently, the share price has dropped a further 20% in a month.

See our latest analysis for Green Plains

Given that Green Plains 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Green Plains saw its revenue increase by 2.6% per year. That's far from impressive given all the money it is losing. It's likely this weak growth has contributed to an annualised return of 14% for the last five years. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

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

NasdaqGS:GPRE Income Statement, January 28th 2020
NasdaqGS:GPRE Income Statement, January 28th 2020

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 it makes a lot of sense to check out what analysts think Green Plains will earn in the future (free profit forecasts).

What about the Total Shareholder Return (TSR)?

We've already covered Green Plains's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Green Plains's TSR, which was a 46% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 24% in the last year, Green Plains shareholders lost 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 12% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Green Plains better, we need to consider many other factors. Take risks, for example - Green Plains has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do 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 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.