As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of iZafe Group AB (publ) (STO:IZAFE B); the share price is down a whopping 75% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 72% in the last year. Shareholders have had an even rougher run lately, with the share price down 44% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 24% in the same timeframe.
See our latest analysis for iZafe Group
Given that iZafe 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. 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.
In the last three years, iZafe Group saw its revenue grow by 116% per year, compound. That is faster than most pre-profit companies. So on the face of it we’re really surprised to see the share price down 37% a year in the same time period. You’d want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn’t lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
OM:IZAFE B Income Statement, March 13th 2020
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market lost about 11% in the twelve months, iZafe Group shareholders did even worse, losing 72%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.5% 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. 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. Take risks, for example – iZafe Group has 5 warning signs (and 3 which don’t sit too well with us) we think you should know about.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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 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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