Introducing Global Indemnity (NASDAQ:GBLI), The Stock That Dropped 33% In The Last Year
The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Global Indemnity Limited (NASDAQ:GBLI) shareholders over the last year, as the share price declined 33%. That's well bellow the market return of 2.0%. At least the damage isn't so bad if you look at the last three years, since the stock is down 14% in that time. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.
View our latest analysis for Global Indemnity
Global Indemnity isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good 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.
Global Indemnity grew its revenue by 9.3% over the last year. That's not a very high growth rate considering it doesn't make profits. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 33% in a year. In a hot market it's easy to forget growth is the life-blood of a loss making company. But if you buy a loss making company then you could become a loss making investor.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Global Indemnity's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Global Indemnity the TSR over the last year was -31%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 2.0% in the last year, Global Indemnity shareholders lost 31% (even including dividends) . 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 0.1% over the last half decade. 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. 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 Global Indemnity by clicking this link.
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 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. Thank you for reading.
