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Every investor on earth makes bad calls sometimes. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Milestone Scientific Inc. (NYSEMKT:MLSS), who have seen the share price tank a massive 86% over a three year period. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 59% in the last year. The good news is that the stock is up 2.5% in the last week.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Milestone Scientific isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years Milestone Scientific saw its revenue shrink by 6.1% per year. That's not what investors generally want to see. The share price fall of 48% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. This business clearly needs to grow revenues if it is to perform as investors hope. Don't let a share price decline ruin your calm. You make better decisions when you're calm.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Milestone Scientific will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 6.4% in the last year, Milestone Scientific shareholders lost 59%. 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 28% 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. 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 Milestone Scientific 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 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.