Top Glove Corporation Bhd (KLSE:TOPGLOV) earnings and shareholder returns have been trending downwards for the last five years, but the stock ascends 9.6% this past week
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 Top Glove Corporation Bhd. (KLSE:TOPGLOV) during the five years that saw its share price drop a whopping 90%. We also note that the stock has performed poorly over the last year, with the share price down 54%. On the other hand the share price has bounced 9.6% over the last week. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
While the stock has risen 9.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Top Glove Corporation Bhd moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
We don't think that the 0.8% is big factor in the share price, since it's quite small, as dividends go. Arguably, the revenue drop of 39% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Top Glove Corporation Bhd will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 0.7% in the last year, Top Glove Corporation Bhd shareholders lost 54% (even including dividends). 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 14% 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian 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.