If you love investing in stocks you’re bound to buy some losers. But the last three years have been particularly tough on longer term Netgem SA (EPA:NTG) shareholders. Sadly for them, the share price is down 61% in that time. The more recent news is of little comfort, with the share price down 30% in a year. More recently, the share price has dropped a further 19% in a month. We do note, however, that the broader market is down 17% in that period, and this may have weighed on the share price.
Check out our latest analysis for Netgem
Given that Netgem 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, Netgem’s revenue dropped 33% per year. That means its revenue trend is very weak compared to other loss making companies. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 27% per year over that time. Bagholders or ‘baggies’ are people who buy more of a stock as the price collapses. They are then left ‘holding the bag’ if the shares turn out to be worthless. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
ENXTPA:NTG Income Statement March 30th 2020
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Netgem’s total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Netgem’s TSR, which was a 53% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
We regret to report that Netgem shareholders are down 23% for the year. Unfortunately, that’s worse than the broader market decline of 15%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 8.2% per year over five years. 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. 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. For instance, we’ve identified 2 warning signs for Netgem that you should be aware of.
But note: Netgem 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 editorial-team@simplywallst.com. 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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