Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Northern Oil and Gas, Inc. (NYSEMKT:NOG) during the five years that saw its share price drop a whopping 83%. Furthermore, it’s down 11% in about a quarter. That’s not much fun for holders.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Northern Oil and Gas isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. 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 five years Northern Oil and Gas saw its revenue shrink by 11% per year. That’s definitely a weaker result than most pre-profit companies report. So it’s not altogether surprising to see the share price down 30% per year in the same time period. We don’t think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Northern Oil and Gas
A Different Perspective
We’re pleased to report that Northern Oil and Gas shareholders have received a total shareholder return of 5.2% over one year. There’s no doubt those recent returns are much better than the TSR loss of 30% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Northern Oil and Gas by clicking this link.
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 US exchanges.
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.
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. Thank you for reading.