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If you love investing in stocks you're bound to buy some losers. But long term The ONE Group Hospitality, Inc. (NASDAQ:STKS) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 63% drop in the share price over that period. And over the last year the share price fell 40%, so we doubt many shareholders are delighted. And the share price decline continued over the last week, dropping some 20%.
With the stock having lost 20% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for ONE Group Hospitality
While ONE Group Hospitality made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over three years, ONE Group Hospitality grew revenue at 18% per year. That's a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 18% per year. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. So this is one stock that might be worth investigating further, or even adding to your watchlist.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market gained around 16% in the last year, ONE Group Hospitality shareholders lost 40%. 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. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 3 warning signs for ONE Group Hospitality (2 can't be ignored!) that you should be aware of before investing here.