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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held CARBO Ceramics Inc. (NYSE:CRR) for five whole years - as the share price tanked 98%. And it's not just long term holders hurting, because the stock is down 73% in the last year. Shareholders have had an even rougher run lately, with the share price down 42% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
CARBO Ceramics isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
Over half a decade CARBO Ceramics reduced its trailing twelve month revenue by 34% 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 55% per year in that 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. So it makes a lot of sense to check out what analysts think CARBO Ceramics will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 10% in the last year, CARBO Ceramics shareholders lost 73%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 55% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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.
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 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. Thank you for reading.