It’s nice to see the CNIM Group S.A. (EPA:COM) share price up 18% in a week. But that is meagre solace in the face of the shocking decline over three years. The share price has sunk like a leaky ship, down 85% in that time. So it’s about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
View our latest analysis for CNIM Group
Given that CNIM 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, CNIM Group saw its revenue grow by 6.1% per year, compound. Given it’s losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 46% per year does seem a bit harsh! We generally don’t try to ‘catch the falling knife’. 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.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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.
What about the Total Shareholder Return (TSR)?
We’ve already covered CNIM Group’s share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for CNIM Group shareholders, and that cash payout explains why its total shareholder loss of 83%, over the last 3 years, isn’t as bad as the share price return.
A Different Perspective
While the broader market gained around 19% in the last year, CNIM Group shareholders lost 81% (even including dividends) . 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 22% 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. 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. For instance, we’ve identified 5 warning signs for CNIM Group (2 make us uncomfortable) that you should be aware of.
But note: CNIM Group 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 FR exchanges.
If you spot an error that warrants correction, please contact the editor at [email protected] 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.
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