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CareRx Corporation (TSE:CRRX) shareholders should be happy to see the share price up 19% in the last quarter. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 52%. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.
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.
CareRx 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.
Over three years, CareRx grew revenue at 5.2% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 15% during the period. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. After all, growing a business isn't easy, and the process will not always be smooth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at CareRx's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that CareRx shareholders have received a total shareholder return of 30% over one year. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with CareRx , and understanding them should be part of your investment process.
Of course CareRx may not be the best stock to buy. So you may wish to see this free collection of growth stocks.