We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the Lineage Cell Therapeutics, Inc. (NYSEMKT:LCTX) share price managed to fall 72% over five long years. That’s an unpleasant experience for long term holders. And some of the more recent buyers are probably worried, too, with the stock falling 22% in the last year. The silver lining is that the stock is up 1.4% in about a week.
Check out our latest analysis for Lineage Cell Therapeutics
Given that Lineage Cell Therapeutics 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.
Over half a decade Lineage Cell Therapeutics reduced its trailing twelve month revenue by 14% for each year. That puts it in an unattractive cohort, to put it mildly. So it’s not altogether surprising to see the share price down 11% per year in the same time period. We don’t think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
earnings-and-revenue-growth
This free interactive report on Lineage Cell Therapeutics’ balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Lineage Cell Therapeutics’ total shareholder return (TSR) and its share price return. 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. We note that Lineage Cell Therapeutics’ TSR, at -67% is higher than its share price return of -72%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Lineage Cell Therapeutics shareholders are down 22% for the year, but the market itself is up 9.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% 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. Even so, be aware that Lineage Cell Therapeutics is showing 4 warning signs in our investment analysis , and 1 of those can’t be ignored…
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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