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Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term SoundThinking, Inc. (NASDAQ:SSTI) shareholders. So they might be feeling emotional about the 68% share price collapse, in that time. And over the last year the share price fell 52%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 19% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for SoundThinking
SoundThinking 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, SoundThinking saw its revenue grow by 20% per year, compound. That's well above most other pre-profit companies. The share price has moved in quite the opposite direction, down 19% over that time, a bad result. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling SoundThinking stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 34% in the last year, SoundThinking shareholders lost 52%. 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 8% 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. It's always interesting to track share price performance over the longer term. But to understand SoundThinking better, we need to consider many other factors. Take risks, for example - SoundThinking has 2 warning signs we think you should be aware of.