If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Finnair Oyj (HEL:FIA1S) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 93% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 26% lower in that time. Unhappily, the share price slid 4.6% in the last week.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for Finnair Oyj
Finnair Oyj 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. 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 the last three years, Finnair Oyj's revenue dropped 27% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 25% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Finnair Oyj stock, you should check out this FREE detailed report on its balance sheet.
We'd be remiss not to mention the difference between Finnair Oyj's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Finnair Oyj's TSR of was a loss of 62% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
Finnair Oyj shareholders are down 26% for the year, but the market itself is up 36%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.8% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Finnair Oyj (at least 1 which is concerning) , 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 FI exchanges.
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