Flotek Industries, Inc. (NYSE:FTK) shareholders should be happy to see the share price up 25% in the last month. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 79% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The fundamental business performance will ultimately determine if the turnaround can be sustained.
While the stock has risen 11% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Because Flotek Industries made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Over half a decade Flotek Industries reduced its trailing twelve month revenue by 39% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 12% 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).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We regret to report that Flotek Industries shareholders are down 27% for the year. Unfortunately, that's worse than the broader market decline of 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Flotek Industries better, we need to consider many other factors. Take risks, for example - Flotek Industries has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.
Flotek Industries is not the only stock that insiders are buying. For those who like to find winning investments 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 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.
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