U.S. Energy (NASDAQ:USEG shareholders incur further losses as stock declines 20% this week, taking five-year losses to 46%
The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in U.S. Energy Corp. (NASDAQ:USEG), since the last five years saw the share price fall 46%. Shareholders have had an even rougher run lately, with the share price down 42% in the last 90 days. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for U.S. Energy
U.S. Energy wasn't profitable in the last twelve months, 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over five years, U.S. Energy grew its revenue at 0.2% per year. That's not a very high growth rate considering it doesn't make profits. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 8% (annualized) in the same time frame. The key question is whether the company can make it to profitability, and beyond, without trouble. Shareholders will want the company to approach profitability if it can't grow revenue any faster.
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 U.S. Energy's financial health with this free report on its balance sheet.
A Different Perspective
While it's certainly disappointing to see that U.S. Energy shares lost 14% throughout the year, that wasn't as bad as the market loss of 20%. Given the total loss of 8% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that U.S. Energy is showing 6 warning signs in our investment analysis , and 4 of those are significant...
But note: U.S. Energy 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 US 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.
