In This Article:
Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Sarine Technologies Ltd. (SGX:U77) have had an unfortunate run in the last three years. Unfortunately, they have held through a 66% decline in the share price in that time.
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.
See our latest analysis for Sarine Technologies
Sarine Technologies 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over the last three years, Sarine Technologies' revenue dropped 12% per year. That is not a good result. 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. Having said that, if growth is coming in the future, now may be the low ebb for the company. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.
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 Sarine Technologies' financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Sarine Technologies, it has a TSR of -59% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Investors in Sarine Technologies had a tough year, with a total loss of 15% (including dividends), against a market gain of about 15%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 2 warning signs for Sarine Technologies you should be aware of, and 1 of them makes us a bit uncomfortable.