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Introducing Capital Senior Living (NYSE:CSU), The Stock That Tanked 78%

Simply Wall St

It is doubtless a positive to see that the Capital Senior Living Corporation ( NYSE:CSU ) share price has gained some 41% in the last three months. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 78% in that time. The recent bounce might mean the long decline is over, but we are not confident. The real question is whether the business can leave its past behind and improve itself over the years ahead.

View our latest analysis for Capital Senior Living

Because Capital Senior Living is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last half decade, Capital Senior Living saw its revenue increase by 5.6% per year. That's not a very high growth rate considering it doesn't make profits. It's not so sure that share price crash of 26% per year is completely deserved, but the market is doubtless disappointed. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:CSU Income Statement, July 31st 2019

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Capital Senior Living will earn in the future (free profit forecasts) .

A Different Perspective

Investors in Capital Senior Living had a tough year, with a total loss of 44%, against a market gain of about 6.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 26% 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 is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Capital Senior Living is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com . 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.