Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Shiloh Industries, Inc. (NASDAQ:SHLO) for half a decade as the share price tanked 77%. We also note that the stock has performed poorly over the last year, with the share price down 53%. The falls have accelerated recently, with the share price down 19% in the last three months.
Shiloh Industries 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over five years, Shiloh Industries grew its revenue at 4.0% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 25%, compound, over five years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Shiloh Industries stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 12% in the last year, Shiloh Industries shareholders lost 53%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 25% 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. If you would like to research Shiloh Industries in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.