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Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of THG Plc (LON:THG) have suffered share price declines over the last year. The share price has slid 66% in that time. THG may have better days ahead, of course; we've only looked at a one year period. The falls have accelerated recently, with the share price down 59% in the last three months.
Since THG has shed UK£1.0b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
THG 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 expect 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.
THG grew its revenue by 38% over the last year. We think that is pretty nice growth. Meanwhile, the share price tanked 66%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think THG will earn in the future (free profit forecasts).
A Different Perspective
Given that the market gained 32% in the last year, THG shareholders might be miffed that they lost 66%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 59% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand THG better, we need to consider many other factors. For example, we've discovered 2 warning signs for THG that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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.
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