Long term investing works well, but it doesn’t always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Mermaid Maritime Public Company Limited (SGX:DU4) for half a decade as the share price tanked 76%. And we doubt long term believers are the only worried holders, since the stock price has declined 27% over the last twelve months. The falls have accelerated recently, with the share price down 42% in the last three months. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.
Check out our latest analysis for Mermaid Maritime
Given that Mermaid Maritime 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Mermaid Maritime reduced its trailing twelve month revenue by 30% 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 25% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Mermaid Maritime’s financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 20% in the twelve months, Mermaid Maritime shareholders did even worse, losing 27%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 25% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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. For example, we’ve discovered 3 warning signs for Mermaid Maritime that you should be aware of before investing here.
If you are like me, then you will 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 SG 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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