If you love investing in stocks you're bound to buy some losers. But the long term shareholders of InnerWorkings, Inc. (NASDAQ:INWK) have had an unfortunate run in the last three years. Sadly for them, the share price is down 57% in that time. Even worse, it's down 23% in about a month, which isn't fun at all.
InnerWorkings 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, InnerWorkings grew revenue at 1.2% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 24% for the last three years. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. After all, growing a business isn't easy, and the process will not always be smooth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 23% in the last year, InnerWorkings shareholders lost 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7.5% per year over five years. We realise that Buffett 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. 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. For example, we've discovered 1 warning sign for InnerWorkings that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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