Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Francesca's Holdings Corporation (NASDAQ:FRAN) during the five years that saw its share price drop a whopping 99%. We also note that the stock has performed poorly over the last year, with the share price down 79%. Shareholders have had an even rougher run lately, with the share price down 81% in the last 90 days.
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.
Given that Francesca's Holdings 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. 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.
In the last half decade, Francesca's Holdings saw its revenue increase by 1.9% per year. That's not a very high growth rate considering it doesn't make profits. It's not so sure that share price crash of 61% per year is completely deserved, but the market is doubtless disappointed. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. A company like this generally needs to produce profits before it can find favour with new investors.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Francesca's Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 13% in the twelve months, Francesca's Holdings shareholders did even worse, losing 79%. 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 61% 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. To that end, you should learn about the 3 warning signs we've spotted with Francesca's Holdings (including 2 which is don't sit too well with us) .
Francesca's Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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