Advertisement
Canada markets open in 2 hours 8 minutes
  • S&P/TSX

    21,897.98
    -367.07 (-1.65%)
     
  • S&P 500

    5,266.95
    -39.09 (-0.74%)
     
  • DOW

    38,441.54
    -411.32 (-1.06%)
     
  • CAD/USD

    0.7294
    +0.0002 (+0.03%)
     
  • CRUDE OIL

    78.98
    -0.25 (-0.32%)
     
  • Bitcoin CAD

    93,069.38
    +54.08 (+0.06%)
     
  • CMC Crypto 200

    1,455.08
    -0.79 (-0.05%)
     
  • GOLD FUTURES

    2,360.90
    -3.20 (-0.14%)
     
  • RUSSELL 2000

    2,036.19
    -30.66 (-1.48%)
     
  • 10-Yr Bond

    4.6240
    +0.0820 (+1.81%)
     
  • NASDAQ futures

    18,746.25
    -56.50 (-0.30%)
     
  • VOLATILITY

    14.46
    +0.18 (+1.26%)
     
  • FTSE

    8,204.71
    +21.64 (+0.26%)
     
  • NIKKEI 225

    38,054.13
    -502.74 (-1.30%)
     
  • CAD/EUR

    0.6738
    -0.0008 (-0.12%)
     

The past year for Microlise Group (LON:SAAS) investors has not been profitable

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Microlise Group plc (LON:SAAS) shareholders over the last year, as the share price declined 35%. That falls noticeably short of the market decline of around 2.3%. Microlise Group hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Microlise Group

Microlise 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

ADVERTISEMENT

In the last twelve months, Microlise Group increased its revenue by 5.9%. That's not a very high growth rate considering it doesn't make profits. Given this lacklustre revenue growth, the share price drop of 35% seems pretty appropriate. In a hot market it's easy to forget growth is the life-blood of a loss making company. So remember, if you buy a profitless company then you risk being a profitless investor.

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
earnings-and-revenue-growth

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While Microlise Group shareholders are down 35% for the year, the market itself is up 2.3%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 33% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here