Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Fidia S.p.A. (BIT:FDA) shareholders. Regrettably, they have had to cope with a 64% drop in the share price over that period. The more recent news is of little comfort, with the share price down 53% in a year. The falls have accelerated recently, with the share price down 37% in the last three months. But this could be related to the weak market, which is down 32% in the same period.
View our latest analysis for Fidia
Given that Fidia 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, Fidia saw its revenue grow by 0.5% per year, compound. Given it’s losing money in pursuit of growth, we are not really impressed with that. It’s likely this weak growth has contributed to an annualised return of 29% for the last three years. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. Keep in mind it isn’t unusual for good businesses to have a tough time or a couple of uninspiring years.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
BIT:FDA Income Statement, March 16th 2020
Take a more thorough look at Fidia’s financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Fidia’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Fidia shareholders, and that cash payout explains why its total shareholder loss of 63%, over the last 3 years, isn’t as bad as the share price return.
A Different Perspective
While the broader market lost about 24% in the twelve months, Fidia shareholders did even worse, losing 53%. 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 13% 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. It’s always interesting to track share price performance over the longer term. But to understand Fidia better, we need to consider many other factors. For instance, we’ve identified 3 warning signs for Fidia (1 can’t be ignored) that you should be aware of.
Of course Fidia may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT 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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