In This Article:
We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the iRobot Corporation (NASDAQ:IRBT) share price dropped 69% in the last half decade. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 46%. More recently, the share price has dropped a further 25% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
If the past week is anything to go by, investor sentiment for iRobot isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for iRobot
Given that iRobot didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, iRobot saw its revenue increase by 1.5% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 11% for the last five years. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. However, it's possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
iRobot shareholders are down 46% for the year, but the market itself is up 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.