Yahoo Finance Easy Come, Easy Go: How Pacific Edge (NZSE:PEB) Shareholders Got Unlucky And Saw 75% Of Their Cash Evaporate
Pacific Edge Limited (NZSE:PEB) shareholders should be happy to see the share price up 18% in the last quarter. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Like a ship taking on water, the share price has sunk 75% in that time. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.
Check out our latest analysis for Pacific Edge
Given that Pacific Edge didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 five years, Pacific Edge grew its revenue at 14% per year. That's a fairly respectable growth rate. So the stock price fall of 24% per year seems pretty steep. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Pacific Edge shareholders are down 33% for the year, but the market itself is up 13%. 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 24% per year over five years. We realise that Buffett 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 businesses. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Pacific Edge 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 NZ exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
