The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But the long term shareholders of Benefitfocus, Inc. (NASDAQ:BNFT) have had an unfortunate run in the last three years. So they might be feeling emotional about the 69% share price collapse, in that time. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days. We do note, however, that the broader market is down 9.5% in that period, and this may have weighed on the share price.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Benefitfocus isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years Benefitfocus saw its revenue shrink by 1.0% per year. That’s not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 19% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don’t generally like to own companies that lose money and can’t grow revenues. But any company is worth looking at when it makes a maiden profit.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Benefitfocus stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 6.9% in the twelve months, Benefitfocus shareholders did even worse, losing 20%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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’s always interesting to track share price performance over the longer term. But to understand Benefitfocus better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Benefitfocus , and understanding them should be part of your investment process.
But note: Benefitfocus 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 US 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.