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Investing in stocks inevitably means buying into some companies that perform poorly. Long term CM.com N.V. (AMS:CMCOM) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 66% drop in the share price over that period. The more recent news is of little comfort, with the share price down 20% in a year. The last week also saw the share price slip down another 11%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for CM.com
CM.com 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, CM.com grew revenue at 2.2% 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 18% 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. 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).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Investors in CM.com had a tough year, with a total loss of 20%, against a market gain of about 5.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. 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. Case in point: We've spotted 1 warning sign for CM.com you should be aware of.