Investors in Materialise (NASDAQ:MTLS) have unfortunately lost 86% over the last three years
Materialise NV (NASDAQ:MTLS) shareholders should be happy to see the share price up 22% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 86%. So it's about time shareholders saw some gains. The thing to think about is whether the business has really turned around. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for Materialise
We don't think that Materialise's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over three years, Materialise grew revenue at 15% per year. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 23% per year is due to the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Materialise has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Materialise stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Materialise had a tough year, with a total loss of 30%, against a market gain of about 15%. 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 9% over the last half decade. We realise that Baron Rothschild 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 business. 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. For example, we've discovered 2 warning signs for Materialise that you should be aware of before investing here.
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 American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
