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Imagine Owning RealTech (ETR:RTC) And Trying To Stomach The 71% Share Price Drop

Simply Wall St
·3-min read

Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held RealTech AG (ETR:RTC) for half a decade as the share price tanked 71%. And some of the more recent buyers are probably worried, too, with the stock falling 26% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days. But this could be related to poor market conditions -- stocks are down 32% in the same time.

See our latest analysis for RealTech

Because RealTech 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over half a decade RealTech reduced its trailing twelve month revenue by 21% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 22% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

XTRA:RTC Income Statement, March 23rd 2020
XTRA:RTC Income Statement, March 23rd 2020

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on RealTech's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that RealTech shareholders are down 26% for the year. Unfortunately, that's worse than the broader market decline of 20%. 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 22% 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. Even so, be aware that RealTech is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

But note: RealTech may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.