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Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of TechTarget, Inc. (NASDAQ:TTGT), who have seen the share price tank a massive 78% over a three year period. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 42%, so we doubt many shareholders are delighted. More recently, the share price has dropped a further 30% 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.
After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Check out our latest analysis for TechTarget
Given that TechTarget 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, TechTarget saw its revenue grow by 20% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 21% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling TechTarget stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in TechTarget had a tough year, with a total loss of 42%, against a market gain of about 28%. 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 5% 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. It's always interesting to track share price performance over the longer term. But to understand TechTarget better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with TechTarget , and understanding them should be part of your investment process.