Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Tattooed Chef, Inc. (NASDAQ:TTCF) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 68%. To make matters worse, the returns over three years have also been really disappointing (the share price is 37% lower than three years ago). The falls have accelerated recently, with the share price down 26% in the last three months.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Given that Tattooed Chef 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 expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Tattooed Chef saw its revenue grow by 39%. That’s definitely a respectable growth rate. Meanwhile, the share price tanked 68%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. To our minds it isn’t enough to just look at revenue, anyway. Always consider when profits will flow.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Tattooed Chef shareholders are down 68% for the year, falling short of the market return. The market shed around 12%, no doubt weighing on the stock price. The three-year loss of 11% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we’ve discovered 1 warning sign for Tattooed Chef that you should be aware of before investing here.
Of course Tattooed Chef 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 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.
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