GrafTech International (NYSE:EAF shareholders incur further losses as stock declines 22% this week, taking five-year losses to 84%
Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held GrafTech International Ltd. (NYSE:EAF) for five whole years - as the share price tanked 84%. We also note that the stock has performed poorly over the last year, with the share price down 22%. The last week also saw the share price slip down another 22%. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With the stock having lost 22% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
GrafTech International 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last five years GrafTech International saw its revenue shrink by 22% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 13% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think GrafTech International will earn in the future (free profit forecasts).
A Different Perspective
Investors in GrafTech International had a tough year, with a total loss of 22%, against a market gain of about 16%. 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. However, the loss over the last year isn't as bad as the 13% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for GrafTech International you should be aware of, and 2 of them are a bit unpleasant.
GrafTech International is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.
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.