Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of SeaBird Exploration Plc (OB:SBX) investors who have held the stock for three years as it declined a whopping 99%. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 59%, so we doubt many shareholders are delighted. Furthermore, it's down 27% in about a quarter. That's not much fun for holders.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
SeaBird Exploration isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, SeaBird Exploration's revenue dropped 40% per year. That's definitely a weaker result than most pre-profit companies report. And as you might expect the share price has been weak too, dropping at a rate of 80% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. 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).
This free interactive report on SeaBird Exploration's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Over the last year, SeaBird Exploration shareholders took a loss of 59%. In contrast the market gained about 4.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, the longer term story isn't pretty, with investment losses running at 80% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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 NO exchanges.
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