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Did You Manage To Avoid Orcoda's (ASX:ODA) Devastating 76% Share Price Drop?

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Simply Wall St
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It is a pleasure to report that the Orcoda Limited (ASX:ODA) is up 31% in the last quarter. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 76%. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.

See our latest analysis for Orcoda

Because Orcoda is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years, Orcoda's revenue dropped 80% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 38%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.

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:ODA Income Statement, December 11th 2019
ASX:ODA Income Statement, December 11th 2019

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

Orcoda provided a TSR of 9.5% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 21% per year, over five years. So this might be a sign the business has turned its fortunes around. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course Orcoda 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 AU exchanges.

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.

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. Thank you for reading.