As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Mangalam Timber Products Limited (NSE:MANGTIMBER), who have seen the share price tank a massive 84% over a three year period. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 73% lower in that time. The falls have accelerated recently, with the share price down 34% in the last three months.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
See our latest analysis for Mangalam Timber Products
Mangalam Timber Products isn't a profitable company, so 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.
In the last three years Mangalam Timber Products saw its revenue shrink by 30% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 46%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
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 interactive report on Mangalam Timber Products's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Mangalam Timber Products shareholders are down 73% for the year, but the market itself is up 8.6%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% 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.