Yahoo Finance Investors in SoundThinking (NASDAQ:SSTI) from five years ago are still down 63%, even after 13% gain this past week
SoundThinking, Inc. (NASDAQ:SSTI) shareholders should be happy to see the share price up 20% in the last month. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 63% after a long stretch. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.
On a more encouraging note the company has added US$24m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
See our latest analysis for SoundThinking
SoundThinking 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 half decade, SoundThinking saw its revenue increase by 21% per year. That's well above most other pre-profit companies. Unfortunately for shareholders the share price has dropped 10% per year - disappointing considering the growth. It's safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Investors in SoundThinking had a tough year, with a total loss of 40%, against a market gain of about 28%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. 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. Take risks, for example - SoundThinking has 3 warning signs we think you should be aware of.
Of course SoundThinking may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
