We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Viasat, Inc. (NASDAQ:VSAT) during the five years that saw its share price drop a whopping 77%. And we doubt long term believers are the only worried holders, since the stock price has declined 48% over the last twelve months. The falls have accelerated recently, with the share price down 33% in the last three months.
After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Viasat isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, Viasat grew its revenue at 8.7% per year. That's a pretty good rate for a long time period. So the stock price fall of 12% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Investors in Viasat had a tough year, with a total loss of 48%, against a market gain of about 31%. 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. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Viasat better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Viasat you should be aware of, and 1 of them makes us a bit uncomfortable.
But note: Viasat may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.