We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the Ilika plc (LON:IKA) share price dropped 68% in the last half decade. That is extremely sub-optimal, to say the least. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days.
Given that Ilika 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Ilika saw its revenue increase by 24% per year. That's better than most loss-making companies. Unfortunately for shareholders the share price has dropped 20% per year - disappointing considering the growth. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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
We're pleased to report that Ilika shareholders have received a total shareholder return of 20% over one year. That certainly beats the loss of about 20% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. You could get a better understanding of Ilika's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.