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Did You Manage To Avoid BuildingIQ's (ASX:BIQ) Devastating 75% Share Price Drop?

Simply Wall St

As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of BuildingIQ, Inc. (ASX:BIQ), who have seen the share price tank a massive 75% over a three year period. 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 35% in the last year. The falls have accelerated recently, with the share price down 30% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

See our latest analysis for BuildingIQ

BuildingIQ isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, BuildingIQ grew revenue at 23% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 37% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

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

ASX:BIQ Income Statement, September 14th 2019

This free interactive report on BuildingIQ's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

The last twelve months weren't great for BuildingIQ shares, which cost holders 35%, while the market was up about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 37% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. You could get a better understanding of BuildingIQ's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like BuildingIQ better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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