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Such Is Life: How Overstock.com (NASDAQ:OSTK) Shareholders Saw Their Shares Drop 53%

Simply Wall St

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example, after five long years the Overstock.com, Inc. (NASDAQ:OSTK) share price is a whole 53% lower. That's not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 46% in the last year. The falls have accelerated recently, with the share price down 43% in the last three months.

View our latest analysis for Overstock.com

Overstock.com isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 five years, Overstock.com grew its revenue at 3.9% per year. That's far from impressive given all the money it is losing. This lacklustre growth has no doubt fueled the loss of 14% per year, in that time. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. However, it's possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqGM:OSTK Income Statement, October 24th 2019

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. You can see what analysts are predicting for Overstock.com in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 14% in the last year, Overstock.com shareholders lost 46%. 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 14% 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. 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 Overstock.com by clicking this link.

Overstock.com is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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 editorial-team@simplywallst.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.