The nature of investing is that you win some, and you lose some. And there’s no doubt that Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) stock has had a really bad year. The share price is down a hefty 64% in that time. Even if you look out three years, the returns are still disappointing, with the share price down35% in that time. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.
After losing 14% this past week, it’s worth investigating the company’s fundamentals to see what we can infer from past performance.
Because Chicken Soup for the Soul Entertainment made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Chicken Soup for the Soul Entertainment grew its revenue by 85% over the last year. That’s a strong result which is better than most other loss making companies. Meanwhile, the share price slid 64%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. This free report showing analyst forecasts should help you form a view on Chicken Soup for the Soul Entertainment
A Different Perspective
We regret to report that Chicken Soup for the Soul Entertainment shareholders are down 64% for the year. Unfortunately, that’s worse than the broader market decline of 21%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. 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. It’s always interesting to track share price performance over the longer term. But to understand Chicken Soup for the Soul Entertainment better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Chicken Soup for the Soul Entertainment , and understanding them should be part of your investment process.
We will like Chicken Soup for the Soul Entertainment better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for Chicken Soup for the Soul Entertainment?
Trading at 89.7% below our estimate of its fair value
Earnings are forecast to grow 64.17% per year
Shareholders have been diluted in the past year
Has less than 1 year of cash runway
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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.