Yahoo Finance Canfor Pulp Products (TSE:CFX) shareholders have endured a 90% loss from investing in the stock five years ago
Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Canfor Pulp Products Inc. (TSE:CFX) during the five years that saw its share price drop a whopping 91%. And some of the more recent buyers are probably worried, too, with the stock falling 60% in the last year. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days. Of course, this share price action may well have been influenced by the 6.1% decline in the broader market, throughout the period. 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.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Canfor Pulp Products
Canfor Pulp Products 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last five years Canfor Pulp Products saw its revenue shrink by 4.8% per year. That's not what investors generally want to see. The share price fall of 14% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. Fear of becoming a 'bagholder' may be keeping people away from this stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Canfor Pulp Products' financial health with this free report on its balance sheet.
A Different Perspective
While the broader market gained around 3.5% in the last year, Canfor Pulp Products shareholders lost 60%. 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 14% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Canfor Pulp Products (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Of course Canfor Pulp Products 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 Canadian 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.
