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As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Spirit Technology Solutions Ltd (ASX:ST1); the share price is down a whopping 75% in the last three years. That would certainly shake our confidence in the decision to own the stock.
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.
View our latest analysis for Spirit Technology Solutions
Spirit Technology Solutions 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Spirit Technology Solutions grew revenue at 1.6% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 21% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Before considering a purchase, take a look at the losses the company is racking up.
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 good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Investors in Spirit Technology Solutions had a tough year, with a total loss of 15%, against a market gain of about 14%. 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. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Spirit Technology Solutions (2 are potentially serious!) that you should be aware of before investing here.