Health Update: Health Update: Petco Health and Wellness Company (NASDAQ:WOOF investor five-year losses grow to 90% as the stock sheds US$56m this past week – What Experts Say– What Experts Say.
Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) for half a decade as the share price tanked 90%. The falls have accelerated recently, with the share price down 18% in the last three months. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
With the stock having lost 7.6% in the past week, it’s worth taking a look at business performance and seeing if there’s any red flags.
Petco Health and Wellness Company 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Petco Health and Wellness Company saw its revenue increase by 3.8% per year. That’s not a very high growth rate considering it doesn’t make profits. Nonetheless, it’s fair to say the rapidly declining share price (down 14%, compound, over five years) suggests the market is very disappointed with this level of growth. We’d be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Petco Health and Wellness Company in this interactive graph of future profit estimates.
Investors in Petco Health and Wellness Company had a tough year, with a total loss of 18%, against a market gain of about 12%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 14% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. To that end, you should be aware of the 1 warning sign we’ve spotted with Petco Health and Wellness Company .