Yahoo Finance ProAssurance (NYSE:PRA) shareholders have endured a 63% loss from investing in the stock five years ago
Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the ProAssurance Corporation (NYSE:PRA) share price dropped 66% in the last half decade. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 27% over the last twelve months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for ProAssurance
Given that ProAssurance didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, ProAssurance saw its revenue increase by 5.6% per year. That's not a very high growth rate considering it doesn't make profits. This lacklustre growth has no doubt fueled the loss of 11% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in ProAssurance. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at ProAssurance's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between ProAssurance's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for ProAssurance shareholders, and that cash payout explains why its total shareholder loss of 63%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 24% in the last year, ProAssurance shareholders lost 27%. 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 10% per year over five years. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course ProAssurance may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
