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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Anyone who held Seritage Growth Properties (NYSE:SRG) for five years would be nursing their metaphorical wounds since the share price dropped 89% in that time. We also note that the stock has performed poorly over the last year, with the share price down 42%. Shareholders have had an even rougher run lately, with the share price down 45% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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.
See our latest analysis for Seritage Growth Properties
Seritage Growth Properties wasn't profitable in the last twelve months, 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last five years Seritage Growth Properties saw its revenue shrink by 30% per year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 14% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Seritage Growth Properties stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Seritage Growth Properties had a tough year, with a total loss of 42%, against a market gain of about 23%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Seritage Growth Properties (1 is significant!) that you should be aware of before investing here.