The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Chembio Diagnostics, Inc. (NASDAQ:CEMI) has fallen short of that second goal, with a share price rise of 18% over five years, which is below the market return. Zooming in, the stock is actually down 0.7% in the last year.
Chembio Diagnostics wasn't profitable in the last twelve months, 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. 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.
For the last half decade, Chembio Diagnostics can boast revenue growth at a rate of 10% per year. That's a pretty good long term growth rate. While the share price has gained 3% per year for five years, that's hardly amazing considering the market also rose. Arguably, that means, the market (previously) expected stronger growth from the company.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Chembio Diagnostics' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Chembio Diagnostics shareholders are down 0.7% for the year, but the market itself is up 23%. 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. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Chembio Diagnostics is showing 3 warning signs in our investment analysis , you should know about...
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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