PFSweb, Inc. (NASDAQ:PFSW) shareholders will doubtless be very grateful to see the share price up 47% in the last quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 62% during that time. Some might say the recent bounce is to be expected after such a bad drop. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
Because PFSweb 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over five years, PFSweb grew its revenue at 4.2% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 18% for the last five years. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in PFSweb. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on PFSweb
A Different Perspective
Investors in PFSweb had a tough year, with a total loss of 32%, against a market gain of about 21%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 18% per year over five years. 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 is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
PFSweb 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.
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