It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Superior Gold Inc. (CVE:SGI) share price is down 27% in the last year. That contrasts poorly with the market return of 1.9%. Superior Gold may have better days ahead, of course; we've only looked at a one year period. Even worse, it's down 8.8% in about a month, which isn't fun at all.
Superior Gold 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 year Superior Gold saw its revenue grow by 11%. While that may seem decent it isn't great considering the company is still making a loss. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 27% in a year. It's important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Superior Gold stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Given that the market gained 1.9% in the last year, Superior Gold shareholders might be miffed that they lost 27%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 1.4%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. You could get a better understanding of Superior Gold's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Superior Gold may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.