Tucows (NASDAQ:TCX) shareholders are up 16% this past week, but still in the red over the last three years
Tucows Inc. (NASDAQ:TCX) shareholders should be happy to see the share price up 16% in the last week. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 74%. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.
While the last three years has been tough for Tucows shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
Check out our latest analysis for Tucows
Given that Tucows 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Tucows grew revenue at 2.4% per year. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 20% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Tucows' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Tucows had a tough year, with a total loss of 41%, against a market gain of about 16%. 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 10% over the last half decade. We realise that Baron Rothschild 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 business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Tucows (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
