As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Profire Energy, Inc. (NASDAQ:PFIE) investors who have held the stock for three years as it declined a whopping 77%. That would certainly shake our confidence in the decision to own the stock. The falls have accelerated recently, with the share price down 14% 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.
Profire Energy wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years Profire Energy saw its revenue shrink by 25% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 21% per year. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Profire Energy's financial health with this free report on its balance sheet.
A Different Perspective
Profire Energy shareholders are up 36% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 1.7% over half a decade It is possible that returns will improve along with the business fundamentals. 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. To that end, you should be aware of the 2 warning signs we've spotted with Profire Energy .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This StoryPFIE
Latest Nasdaq-Listed Companies Videos
- Trade Alert: The President Of United Airlines Holdings, Inc. (NASDAQ:UAL), Brett Hart, Has Sold Some Shares Recently
- Vaxart, Inc. (NASDAQ:VXRT) Is Expected To Breakeven In The Near Future
- A MiMedx Group, Inc. (NASDAQ:MDXG) insider lowered their holding by 11% earlier this year
- Investors push CrowdStrike Holdings (NASDAQ:CRWD) 5.8% lower this week, company's increasing losses might be to blame