Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don’t succeed. Zooming in on an example, the Pressure Technologies plc (LON:PRES) share price dropped 63% in the last half decade. That is extremely sub-optimal, to say the least. The falls have accelerated recently, with the share price down 28% in the last three months. But this could be related to the weak market, which is down 21% in the same period.
See our latest analysis for Pressure Technologies
Given that Pressure Technologies 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Pressure Technologies reduced its trailing twelve month revenue by 17% for each year. That’s definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 18% (annualized) in the same time period. We don’t generally like to own companies that lose money and don’t grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It’s good to see that Pressure Technologies has rewarded shareholders with a total shareholder return of 2.7% in the last twelve months. Notably the five-year annualised TSR loss of 17% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Pressure Technologies (of which 1 makes us a bit uncomfortable!) you should know about.
But note: Pressure Technologies 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 GB 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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