Evolva Holding SA (VTX:EVE) shareholders should be happy to see the share price up 25% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. In fact, the share price has tumbled down a mountain to land 86% lower after that period. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The real question is whether the business can leave its past behind and improve itself over the years ahead.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for Evolva Holding
Evolva Holding 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Evolva Holding saw its revenue shrink by 7.1% per year. That's not what investors generally want to see. The share price fall of 32% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. That is not really what the successful investors we know aim for.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Evolva Holding stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Evolva Holding's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Evolva Holding's TSR, at -82% is higher than its share price return of -86%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
While the broader market gained around 12% in the last year, Evolva Holding shareholders lost 34%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 29% per year over five years. We realise that Buffett 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 businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.