Yahoo Finance Investors push Calix (ASX:CXL) 10% lower this week, company's increasing losses might be to blame
While Calix Limited (ASX:CXL) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 23% in the last quarter. On the bright side the returns have been quite good over the last half decade. Its return of 90% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 72% drop, in the last year.
Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.
View our latest analysis for Calix
Calix isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last 5 years Calix saw its revenue grow at 24% per year. That's well above most pre-profit companies. While the compound gain of 14% per year is good, it's not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at Calix. Opportunity lies where the market hasn't fully priced growth in the underlying business.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Calix in this interactive graph of future profit estimates.
A Different Perspective
Calix shareholders are down 72% for the year, but the market itself is up 11%. 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 14%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Calix (1 doesn't sit too well with us!) that you should be aware of before investing here.
Calix is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
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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.
