Further weakness as Jumia Technologies (NYSE:JMIA) drops 5.7% this week, taking one-year losses to 84%
The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Jumia Technologies AG (NYSE:JMIA); the share price is down a whopping 84% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on Jumia Technologies because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days. 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.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
See our latest analysis for Jumia Technologies
Because Jumia Technologies made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Jumia Technologies' revenue didn't grow at all in the last year. In fact, it fell 2.9%. That's not what investors generally want to see. The market obviously agrees, since the share price tanked 84%. Holders should not lose the lesson: loss making companies should grow revenue. But markets do over-react, so there opportunity for investors who are willing to take the time to dig deeper and understand the business.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While Jumia Technologies shareholders are down 84% for the year, the market itself is up 4.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 32% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Jumia Technologies (at least 1 which is concerning) , and understanding them should be part of your investment process.
Of course Jumia Technologies 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 US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
