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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Fluence Corporation Limited (ASX:FLC) share price dropped 69% in the last half decade. We certainly feel for shareholders who bought near the top. The falls have accelerated recently, with the share price down 29% in the last three months.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Fluence
Fluence isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Fluence saw its revenue increase by 3.2% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 11% for the last five years. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. However, it's possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Fluence in this interactive graph of future profit estimates.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Fluence's total shareholder return (TSR) and its share price change, which we've covered above. 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. Fluence hasn't been paying dividends, but its TSR of -65% exceeds its share price return of -69%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.