As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Quorum Health Corporation (NYSE:QHC), who have seen the share price tank a massive 90% over a three year period. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 86%, so we doubt many shareholders are delighted. On top of that, the share price has dropped a further 46% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
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.
Because Quorum Health is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
In the last three years Quorum Health saw its revenue shrink by 7.1% per year. That's not what investors generally want to see. Having said that the 53% annualized share price decline highlights the risk of investing in unprofitable companies. We're generally averse to companies with declining revenues, but we're not alone in that. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Quorum Health's financial health with this free report on its balance sheet.
A Different Perspective
Over the last year, Quorum Health shareholders took a loss of 86%. In contrast the market gained about 15%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 53% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. You could get a better understanding of Quorum Health's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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