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Even the best investor on earth makes unsuccessful investments. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame ATI Physical Therapy, Inc. (NYSE:ATIP) shareholders if they were still in shock after the stock dropped like a lead balloon, down 71% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. ATI Physical Therapy hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
ATI Physical Therapy wasn't profitable in the last twelve months, 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year ATI Physical Therapy saw its revenue fall by 11%. That's not what investors generally want to see. The share price fall of 71% in a year tells the story. Holders should not lose the lesson: loss making companies should grow revenue. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on ATI Physical Therapy's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 37% in the last year, ATI Physical Therapy shareholders might be miffed that they lost 71%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 36% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that ATI Physical Therapy is showing 2 warning signs in our investment analysis , you should know about...
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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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