As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of The Alkaline Water Company Inc. (NASDAQ:WTER), who have seen the share price tank a massive 78% over a three year period. That would be a disturbing experience. And over the last year the share price fell 58%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 62% in the last 90 days.
If the past week is anything to go by, investor sentiment for Alkaline Water isn’t positive, so let’s see if there’s a mismatch between fundamentals and the share price.
Because Alkaline Water 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Alkaline Water grew revenue at 19% per year. That’s a pretty good rate of top-line growth. So it’s hard to believe the share price decline of 21% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify – even when a loss making company grows revenue, it can fail to deliver for shareholders.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Alkaline Water stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We regret to report that Alkaline Water shareholders are down 58% for the year. Unfortunately, that’s worse than the broader market decline of 9.4%. 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 11% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Alkaline Water better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 5 warning signs with Alkaline Water (at least 1 which doesn’t sit too well with us) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.