We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Anyone who held Elanco Animal Health Incorporated (NYSE:ELAN) for five years would be nursing their metaphorical wounds since the share price dropped 73% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 33% over the last twelve months. Furthermore, it's down 26% in about a quarter. That's not much fun for holders.

With the stock having lost 3.2% 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 Elanco Animal Health

Because Elanco Animal Health made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 five years, Elanco Animal Health grew its revenue at 11% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 12% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Elanco Animal Health in this interactive graph of future profit estimates.

A Different Perspective

Investors in Elanco Animal Health had a tough year, with a total loss of 33%, against a market gain of about 7.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. 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. For instance, we've identified 2 warning signs for Elanco Animal Health that you should be aware of.

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 American 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.