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Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Xaar plc (LON:XAR) have had an unfortunate run in the last three years. Sadly for them, the share price is down 55% in that time. And over the last year the share price fell 35%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 34% in the last three months.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Xaar
Xaar isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over three years, Xaar grew revenue at 7.2% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. It's likely this weak growth has contributed to an annualised return of 16% for the last three years. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 14% in the last year, Xaar shareholders lost 35%. 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 3%, 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. To that end, you should be aware of the 1 warning sign we've spotted with Xaar .
Of course Xaar may not be the best stock to buy. So you may wish to see this free collection of growth stocks.