Distil plc (LON:DIS) shareholders should be happy to see the share price up 12% in the last month. But that's small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 68% in that time. The share price recovery is not so impressive when you consider the fall. You could argue that the sell-off was too severe.
We don't think that Distil'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. It would be hard to believe in a more profitable future without growing revenues.
In just one year Distil saw its revenue fall by 13%. That looks pretty grim, at a glance. In the absence of profits, it's not unreasonable that the share price fell 68%. Having said that, if growth is coming in the future, the stock may have better days ahead. We have a natural aversion to companies that are losing money and shrinking revenue. But perhaps that is being too careful.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Distil's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Distil had a tough year, with a total loss of 68%, against a market gain of about 21%. 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 3.8% 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. Is Distil cheap compared to other companies? These 3 valuation measures might help you decide.
We will like Distil 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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