Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term GrowGeneration Corp. (NASDAQ:GRWG) shareholders. Sadly for them, the share price is down 61% in that time. And more recent buyers are having a tough time too, with a drop of 35% in the last year. On top of that, the share price is down 10% in the last week.
After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Given that GrowGeneration 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, GrowGeneration grew revenue at 26% per year. That is faster than most pre-profit companies. In contrast, the share price is down 17% compound, over three years - disappointing by most standards. 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.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at GrowGeneration's financial health with this free report on its balance sheet.
A Different Perspective
GrowGeneration shareholders are down 35% for the year, but the market itself is up 8.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.8% per year over five years. 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. 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 2 warning signs with GrowGeneration , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.