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As an investor, mistakes are inevitable. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Time Out Group plc (LON:TMO), who have seen the share price tank a massive 73% over a three year period. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 71% lower in that time. The good news is that the stock is up 2.9% in the last week.
Given that Time Out Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, Time Out Group saw its revenue grow by 22% per year, compound. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 20% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Time Out Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Time Out Group shareholders are down 71% for the year, falling short of the market return. Meanwhile, the broader market slid about 6.3%, likely weighing on the stock. Shareholders have lost 20% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Time Out Group better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Time Out Group .
Time Out Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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. 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.
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