Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Generally speaking long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the PDC Energy, Inc. (NASDAQ:PDCE) share price dropped 53% in the last half decade. 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. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.
Given that PDC Energy didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.
Over five years, PDC Energy grew its revenue at 25% per year. That's better than most loss-making companies. In contrast, the share price is has averaged a loss of 14% per year - that's quite disappointing. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual 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. So it makes a lot of sense to check out what analysts think PDC Energy will earn in the future (free profit forecasts).
A Different Perspective
Investors in PDC Energy had a tough year, with a total loss of 46%, against a market gain of about 2.7%. 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 14% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. 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 PDC Energy by clicking this link.
PDC Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.