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Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Anyone who held thyssenkrupp AG (ETR:TKA) for five years would be nursing their metaphorical wounds since the share price dropped 72% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 52% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.
On a more encouraging note the company has added €139m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
Check out our latest analysis for thyssenkrupp
thyssenkrupp isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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, thyssenkrupp grew its revenue at 4.1% per year. That's not a very high growth rate considering it doesn't make profits. It's not so sure that share price crash of 12% per year is completely deserved, but the market is doubtless disappointed. We'd be pretty cautious about this one, although the sell-off may be too severe. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at thyssenkrupp's financial health with this free report on its balance sheet.
A Different Perspective
thyssenkrupp shareholders are down 51% for the year (even including dividends), but the market itself is up 17%. 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 11% per year over five years. We realise that Baron Rothschild 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 business. 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 instance, we've identified 1 warning sign for thyssenkrupp that you should be aware of.