As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Veris Limited (ASX:VRS), who have seen the share price tank a massive 80% over a three year period. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 74%, so we doubt many shareholders are delighted. On the other hand the share price has bounced 5.3% over the last week.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Given that Veris 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.
Over three years, Veris grew revenue at 9.6% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 42% share price drop (each year) is entirely about the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Veris
A Different Perspective
While the broader market gained around 13% in the last year, Veris shareholders lost 74% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 21% per year over five years. 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Veris by clicking this link.
Veris is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.