1 day Ago By Simply Wall St.
It is doubtless a positive to see that the ( ) share price has gained some 65% in the last three months. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 90% in that time.
Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
While the last three years has been tough for Pacific Edge shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns. Pacific Edge wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS).
Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last three years, Pacific Edge saw its revenue grow by 36% per year, compound. That's well above most other pre-profit companies. So why has the share priced crashed 24% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses.
Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital. The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this . It's nice to see that Pacific Edge shareholders have received a total shareholder return of 13% over the last year. That certainly beats the loss of about 4% per year over the last half decade.
We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Pacific Edge better, we need to consider many other factors.
Even so, be aware that , you should know about...
For those who like to find this.
