Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Carver Bancorp, Inc. (NASDAQ:CARV) share price is a whole 65% lower. We certainly feel for shareholders who bought near the top. And it's not just long term holders hurting, because the stock is down 50% in the last year. Furthermore, it's down 29% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 16% decline in the broader market, throughout the period.
Carver Bancorp isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Over half a decade Carver Bancorp reduced its trailing twelve month revenue by 1.5% for each year. That's not what investors generally want to see. The share price decline of 19% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. We don't think anyone is rushing to buy this stock. Not that many investors like to invest in companies that are losing money and not growing revenue.
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
While the broader market lost about 4.8% in the twelve months, Carver Bancorp shareholders did even worse, losing 50%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 19% 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. 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. Case in point: We've spotted 3 warning signs for Carver Bancorp you should be aware of, and 2 of them are potentially serious.
If you are like me, then you will 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.
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