Even after rising 35% this past week, Largo (TSE:LGO) shareholders are still down 77% over the past three years

Simply Wall St.
2024-10-31

Largo Inc. (TSE:LGO) has rebounded strongly over the last week, with the share price soaring 35%. But the last three years have seen a terrible decline. To wit, the share price sky-dived 77% in that time. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

The recent uptick of 35% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for Largo

Because Largo 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, Largo's revenue dropped 0.9% per year. That is not a good result. Having said that the 21% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

TSX:LGO Earnings and Revenue Growth October 31st 2024

Take a more thorough look at Largo's financial health with this free report on its balance sheet.

A Different Perspective

Largo shareholders are up 9.6% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 12% endured over half a decade. It could well be that the business is stabilizing. 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. Case in point: We've spotted 1 warning sign for Largo you should be aware of.

Of course Largo 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 Canadian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

免責聲明:投資有風險,本文並非投資建議,以上內容不應被視為任何金融產品的購買或出售要約、建議或邀請,作者或其他用戶的任何相關討論、評論或帖子也不應被視為此類內容。本文僅供一般參考,不考慮您的個人投資目標、財務狀況或需求。TTM對信息的準確性和完整性不承擔任何責任或保證,投資者應自行研究並在投資前尋求專業建議。

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