It’s easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Sonetel AB (publ) (STO:SONE) share price is down 24% in the last year. That’s disappointing when you consider the market returned -12%. Because Sonetel hasn’t been listed for many years, the market is still learning about how the business performs. It’s down 44% in about a month. However, we note the price may have been impacted by the broader market, which is down 31% in the same time period.
See our latest analysis for Sonetel
Given that Sonetel 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. Shareholders of unprofitable companies usually expect strong 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.
Sonetel grew its revenue by 3.0% over the last year. That’s not a very high growth rate considering it doesn’t make profits. Given this lacklustre revenue growth, the share price drop of 24% seems pretty appropriate. In a hot market it’s easy to forget growth is the life-blood of a loss making company. So remember, if you buy a profitless company then you risk being a profitless investor.
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 Sonetel’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We doubt Sonetel shareholders are happy with the loss of 24% over twelve months. That falls short of the market, which lost 12%. There’s no doubt that’s a disappointment, but the stock may well have fared better in a stronger market. It’s worth noting that the last three months did the real damage, with a 41% decline. So it seems like some holders have been dumping the stock of late – and that’s not bullish. 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. To that end, you should learn about the 6 warning signs we’ve spotted with Sonetel (including 3 which is can’t be ignored) .
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 SE 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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