Pharos Energy's(LON:PHAR) Share Price Is Down 87% Over The Past Five Years.

Simply Wall St

It is doubtless a positive to see that the Pharos Energy plc (LON:PHAR) share price has gained some 48% in the last three months. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Like a ship taking on water, the share price has sunk 87% in that time. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

View our latest analysis for Pharos Energy

Pharos Energy 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over half a decade Pharos Energy reduced its trailing twelve month revenue by 6.4% for each year. While far from catastrophic that is not good. The share price fall of 13% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. That is not really what the successful investors we know aim for.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

If you are thinking of buying or selling Pharos Energy stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Pharos Energy's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Pharos Energy's TSR of was a loss of 85% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Pharos Energy shareholders are down 60% for the year. Unfortunately, that's worse than the broader market decline of 6.7%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Pharos Energy better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Pharos Energy you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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