As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Casta Diva Group S.p.A. (BIT:CDG) investors who have held the stock for three years as it declined a whopping 80%. That'd be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 57% in the last year. The falls have accelerated recently, with the share price down 18% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
We don't think that Casta Diva Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
The last twelve months weren't great for Casta Diva Group shares, which cost holders 57%, while the market was up about 16%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 42% 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. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before forming an opinion on Casta Diva Group you might want to consider these 3 valuation metrics.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.