Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Strategic Minerals Plc (LON:SML) have suffered share price declines over the last year. To wit the share price is down 57% in that time. Longer term investors have fared much better, since the share price is up 53% in three years. Shareholders have had an even rougher run lately, with the share price down 39% in the last 90 days.
Strategic Minerals 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Strategic Minerals's revenue didn't grow at all in the last year. In fact, it fell 58%. If you think that's a particularly bad result, you're statistically on the money Arguably, the market has responded appropriately to this performance by sending the share price down 57% in the same time period. Buying shares in companies that lose money, shrink revenue, and see share price declines is unpopular with investors, but popular with speculators (apparently). So we'll be looking for strong improvements on the numbers before getting excited.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Strategic Minerals's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 24% in the last year, Strategic Minerals shareholders lost 57%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 6.7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on Strategic Minerals it might be wise to click here to see if insiders have been buying or selling shares.
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 GB exchanges.
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