Investors are selling off J D Wetherspoon (LON:JDW), lack of profits no doubt contribute to shareholders one-year loss
The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in J D Wetherspoon plc (LON:JDW) have tasted that bitter downside in the last year, as the share price dropped 27%. That contrasts poorly with the market return of 14%. Taking the longer term view, the stock fell 25% over the last three years. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.
If the past week is anything to go by, investor sentiment for J D Wetherspoon isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
View our latest analysis for J D Wetherspoon
J D Wetherspoon wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
J D Wetherspoon's revenue didn't grow at all in the last year. In fact, it fell 39%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 27% in that time. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
J D Wetherspoon is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Investors in J D Wetherspoon had a tough year, with a total loss of 27%, against a market gain of about 14%. 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 0.8% 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. It's always interesting to track share price performance over the longer term. But to understand J D Wetherspoon better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with J D Wetherspoon (at least 1 which is significant) , and understanding them should be part of your investment process.
We will like J D Wetherspoon better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
