Shareholders in OnTheMarket (LON:OTMP) are in the red if they invested five years ago

Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the OnTheMarket plc (LON:OTMP) share price is a whole 68% lower. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 38% in the last year. The falls have accelerated recently, with the share price down 26% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for OnTheMarket

OnTheMarket 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over five years, OnTheMarket grew its revenue at 21% per year. That's well above most other pre-profit companies. In contrast, the share price is has averaged a loss of 11% per year - that's quite disappointing. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth

If you are thinking of buying or selling OnTheMarket stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in OnTheMarket had a tough year, with a total loss of 38%, against a market gain of about 1.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with OnTheMarket , and understanding them should be part of your investment process.

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 British 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.

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