3 Sixty Risk Solutions Ltd. (CSE:SAFE) shareholders should be happy to see the share price up 11% in the last week. But that is meagre solace when you consider how the price has plummeted over the last year. Indeed, the share price is down a whopping 91% in the last year. Arguably, the recent bounce is to be expected after such a bad drop. The bigger issue is whether the company can sustain the momentum in the long term.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Given that 3 Sixty Risk Solutions didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year 3 Sixty Risk Solutions saw its revenue grow by 426%. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 91% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Given that the market gained 14% in the last year, 3 Sixty Risk Solutions shareholders might be miffed that they lost 91%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 50% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Be aware that 3 Sixty Risk Solutions is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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