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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the Art's-Way Manufacturing Co., Inc. (NASDAQ:ARTW) share price managed to fall 63% over five long years. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 21% over the last twelve months. On the other hand, we note it's up 9.0% in about a month. But this could be related to good market conditions, with stocks up around 3.8% during the period.
Because Art's-Way Manufacturing is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 Art's-Way Manufacturing reduced its trailing twelve month revenue by 14% for each year. That's definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 18% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Art's-Way Manufacturing's earnings, revenue and cash flow.
A Different Perspective
Art's-Way Manufacturing shareholders are down 21% for the year, but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 18% 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. Before spending more time on Art's-Way Manufacturing it might be wise to click here to see if insiders have been buying or selling shares.
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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.