Generally speaking long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the Saipem S.p.A. (BIT:SPM) share price managed to fall 96% over five long years. That's an unpleasant experience for long term holders. More recently, the share price has dropped a further 13% in a month.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Check out our latest analysis for Saipem
Saipem 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. 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 half a decade Saipem reduced its trailing twelve month revenue by 9.5% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 46% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Saipem is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Saipem's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Saipem shareholders, and that cash payout explains why its total shareholder loss of 65%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Investors in Saipem had a tough year, with a total loss of 1.2%, against a market gain of about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 19% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You could get a better understanding of Saipem's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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February 07, 2020 at 12:40PM
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Easy Come, Easy Go: How Saipem (BIT:SPM) Shareholders Torched 96% Of Their Cash - Yahoo Finance
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