As an investor, mistakes are inevitable. But really bad investments should be rare. So spare a thought for the long term shareholders of Green Plains Inc. (NASDAQ:GPRE); the share price is down a whopping 71% in the last three years. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 57% in the last year. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.

Since Green Plains has shed US$50m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Because Green Plains 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 three years, Green Plains grew revenue at 0.09% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 19%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Green Plains stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market gained around 34% in the last year, Green Plains shareholders lost 57%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Green Plains , and understanding them should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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