Over the last month the CyanConnode Holdings plc (LON:CYAN) has been much stronger than before, rebounding by 61%. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 95%. So we don't gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery.
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.
CyanConnode Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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, CyanConnode Holdings saw its revenue increase by 53% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 46% throughout that time. It could be that the stock was over-hyped before. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
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
While the broader market gained around 18% in the last year, CyanConnode Holdings shareholders lost 68%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 46% 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. 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. Case in point: We've spotted 6 warning signs for CyanConnode Holdings you should be aware of, and 4 of them are a bit concerning.
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 GB exchanges.
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