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J D Wetherspoon (LON:JDW) adds UK£45m to market cap in the past 7 days, though investors from three years ago are still down 44%

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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term J D Wetherspoon plc (LON:JDW) shareholders, since the share price is down 44% in the last three years, falling well short of the market decline of around 15%. And over the last year the share price fell 43%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 14% in the last three months.

On a more encouraging note the company has added UK£45m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for J D Wetherspoon

J D Wetherspoon 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years J D Wetherspoon saw its revenue shrink by 30% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 13% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

J D Wetherspoon is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling J D Wetherspoon stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

J D Wetherspoon shareholders are down 43% for the year, but the market itself is up 1.8%. 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 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand J D Wetherspoon better, we need to consider many other factors. Take risks, for example - J D Wetherspoon has 1 warning sign we think you should be aware of.

If you are like me, then you will 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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