We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Invigor Group Limited (ASX:IVO) for half a decade as the share price tanked 98%. We also note that the stock has performed poorly over the last year, with the share price down 64%. Shareholders have had an even rougher run lately, with the share price down 43% in the last 90 days.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Given that Invigor Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Invigor Group reduced its trailing twelve month revenue by 3.2% for each year. That's not what investors generally want to see. If a business loses money, you want it to grow, so no surprises that the share price has dropped 52% each year in that time. We're generally averse to companies with declining revenues, but we're not alone in that. That is not really what the successful investors we know aim for.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market gained around 16% in the last year, Invigor Group shareholders lost 64%. 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 52% over the last half decade. We realise that Buffett 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 businesses. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Invigor Group by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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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. Thank you for reading.