Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Hydrodec Group plc (LON:HYR) for five whole years - as the share price tanked 99%. We also note that the stock has performed poorly over the last year, with the share price down 85%. Shareholders have had an even rougher run lately, with the share price down 78% 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.
Because Hydrodec Group is loss-making, 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Hydrodec Group reduced its trailing twelve month revenue by 28% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 58% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Hydrodec Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Hydrodec Group shareholders are down 85% for the year, but the market itself is up 9.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 58% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You could get a better understanding of Hydrodec Group's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.