Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So spare a thought for the long term shareholders of Technicolor SA (EPA:TCH); the share price is down a whopping 87% in the last three years. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 33%, so we doubt many shareholders are delighted. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.
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 Technicolor 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 Technicolor saw its revenue shrink by 5.5% per year. That is not a good result. The share price fall of 49% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. This business clearly needs to grow revenues if it is to perform as investors hope. Don't let a share price decline ruin your calm. You make better decisions when you're calm.
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 Technicolor's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Technicolor had a tough year, with a total loss of 33%, against a market gain of about 3.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 32% 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course Technicolor may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR 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.