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If You Had Bought Tarena International's (NASDAQ:TEDU) Shares Three Years Ago You Would Be Down 89%

Simply Wall St

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 Tarena International, Inc. (NASDAQ:TEDU) investors who have held the stock for three years as it declined a whopping 89%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. Shareholders have had an even rougher run lately, with the share price down 21% 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.

View our latest analysis for Tarena International

Given that Tarena International didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Tarena International grew revenue at 1.8% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 24%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Tarena International shareholders are up 15% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 13% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Tarena International better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Tarena International (at least 1 which is concerning) , and understanding them should be part of your investment process.

We will like Tarena International better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.