Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example the SiriusPoint Ltd. (NYSE:SPNT) share price dropped 53% over five years. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 44% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days. Of course, this share price action may well have been influenced by the 13% decline in the broader market, throughout the period.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Because SiriusPoint made a loss in the last twelve months, 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. 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, SiriusPoint grew its revenue at 22% per year. That's well above most other pre-profit companies. In contrast, the share price is has averaged a loss of 9% per year - that's quite disappointing. It's safe to say investor expectations are more grounded now. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market lost about 10% in the twelve months, SiriusPoint shareholders did even worse, losing 44%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for SiriusPoint (1 is a bit unpleasant!) that you should be aware of before investing here.
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.
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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.