The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term TRX Gold Corporation (TSE:TNX) shareholders. Sadly for them, the share price is down 54% in that time. Unfortunately the share price momentum is still quite negative, with prices down 27% in thirty days.
After losing 16% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for TRX Gold
Given that TRX Gold 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, TRX Gold saw its revenue grow by 164% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 15% over that time, a bad result. This could mean hype has come out of the stock because the losses are concerning investors. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for TRX Gold in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that TRX Gold shareholders are down 19% for the year. Unfortunately, that's worse than the broader market decline of 4.6%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with TRX Gold (at least 1 which is significant) , and understanding them should be part of your investment process.