Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Leaf Group Ltd. (NYSE:LEAF) have suffered share price declines over the last year. The share price is down a hefty 67% in that time. Notably, shareholders had a tough run over the longer term, too, with a drop of 43% in the last three years. The falls have accelerated recently, with the share price down 50% in the last three months.
Given that Leaf Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Leaf Group saw its revenue grow by 11%. While that may seem decent it isn't great considering the company is still making a loss. Without profits, and with revenue growth sluggish, you get a 67% loss for shareholders, over the year. We'd want to see evidence that future revenue growth will be stronger before getting too interested. Of course, the market can be too impatient at times. Why not take a closer look at this one so you're ready to pounce if growth does accelerate.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Leaf Group's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market gained around 3.7% in the last year, Leaf Group shareholders lost 67%. 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 14% over the last half decade. 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. Before spending more time on Leaf Group it might be wise to click here to see if insiders have been buying or selling shares.
We will like Leaf Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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