Yahoo Finance Further weakness as Ocado Group (LON:OCDO) drops 10% this week, taking three-year losses to 85%
As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Ocado Group plc (LON:OCDO), who have seen the share price tank a massive 85% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 41% in the last year. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With the stock having lost 10% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Ocado Group
Ocado Group 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. 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.
Over three years, Ocado Group grew revenue at 4.1% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 23%, compound, over three years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Before considering a purchase, take a look at the losses the company is racking up.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Ocado Group will earn in the future (free profit forecasts).
A Different Perspective
Ocado Group shareholders are down 41% for the year, but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Ocado Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for Ocado Group that you should be aware of.
Ocado Group is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
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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