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The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Creative Technology Ltd (SGX:C76) have had an unfortunate run in the last three years. Unfortunately, they have held through a 62% decline in the share price in that time. The more recent news is of little comfort, with the share price down 22% in a year. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Creative Technology
Creative Technology isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Creative Technology grew revenue at 0.2% per year. 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 17% for the last three years. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). After all, growing a business isn't easy, and the process will not always be smooth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Investors in Creative Technology had a tough year, with a total loss of 22%, against a market gain of about 23%. 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 7% 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 Creative Technology better, we need to consider many other factors. Even so, be aware that Creative Technology is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...