Further weakness as Revlon (NYSE:REV) drops 13% this week, taking three-year losses to 78%
It's not possible to invest over long periods without making some bad investments. But really bad investments should be rare. So spare a thought for the long term shareholders of Revlon, Inc. (NYSE:REV); the share price is down a whopping 78% in the last three years. That'd be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 52% in the last year. Furthermore, it's down 49% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Check out our latest analysis for Revlon
Because Revlon made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong 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 the last three years, Revlon's revenue dropped 8.5% per year. That's not what investors generally want to see. Having said that the 21% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Revlon's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 8.4% in the twelve months, Revlon shareholders did even worse, losing 52%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Revlon (of which 2 don't sit too well with us!) you should know about.
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 US exchanges.
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