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For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Nortech Systems Incorporated (NASDAQ:NSYS) shareholders for doubting their decision to hold, with the stock down 40% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 25%. Shareholders have had an even rougher run lately, with the share price down 23% in the last 90 days.
Check out our latest analysis for Nortech Systems
Nortech Systems isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over five years, Nortech Systems grew its revenue at 0.03% per year. That's far from impressive given all the money it is losing. Given the weak growth, the share price fall of 9.8% isn't particularly surprising. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. It could be worth putting it on your watchlist and revisiting when it makes its maiden profit.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Nortech Systems's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Nortech Systems had a tough year, with a total loss of 25%, against a market gain of about 3.0%. 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 9.8% over the last half decade. 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 could get a better understanding of Nortech Systems's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.