Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Trajan Group Holdings Limited (ASX:TRJ) share price slid 14% over twelve months. That's well below the market decline of 6.6%. Trajan Group Holdings may have better days ahead, of course; we've only looked at a one year period. In the last ninety days we've seen the share price slide 36%. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Trajan Group Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
In the last year Trajan Group Holdings saw its revenue grow by 13%. While that may seem decent it isn't great considering the company is still making a loss. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 14% in a year. It's important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Trajan Group Holdings
A Different Perspective
We doubt Trajan Group Holdings shareholders are happy with the loss of 14% over twelve months. That falls short of the market, which lost 6.6%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Notably, the loss over the last year isn't as bad as the 36% drop in the last three months. So it seems like some holders have been dumping the stock of late - and that's not bullish. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Trajan Group Holdings you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.