If you love investing in stocks you're bound to buy some losers. But the long term shareholders of RGT Berhad (KLSE:RGTBHD) have had an unfortunate run in the last three years. Sadly for them, the share price is down 63% in that time. And over the last year the share price fell 37%, so we doubt many shareholders are delighted.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for RGT Berhad
We don't think that RGT Berhad's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. 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 the last three years, RGT Berhad's revenue dropped 1.6% per year. That's not what investors generally want to see. The share price decline of 18% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on RGT Berhad's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
RGT Berhad shareholders are down 35% for the year (even including dividends), but the market itself is up 9.7%. 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. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 4 warning signs with RGT Berhad (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.