It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame The Green Organic Dutchman Holdings Ltd. (TSE:TGOD) shareholders if they were still in shock after the stock dropped like a lead balloon, down 86% in just one year. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on Green Organic Dutchman Holdings because we don't have a long term history to look at. There was little comfort for shareholders in the last week as the price declined a further 5.3%.
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.
Green Organic Dutchman Holdings wasn't profitable in the last twelve months, 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Given that the market gained 3.3% in the last year, Green Organic Dutchman Holdings shareholders might be miffed that they lost 86%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 27%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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 3 warning signs with Green Organic Dutchman Holdings (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
Green Organic Dutchman Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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