Imagine Owning TruFin (LON:TRU) And Trying To Stomach The 81% Share Price Drop
The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. We wouldn't blame TruFin plc (LON:TRU) shareholders if they were still in shock after the stock dropped like a lead balloon, down 81% in just one year. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on TruFin 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 40% in the last 90 days. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.
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.
See our latest analysis for TruFin
Because TruFin 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, TruFin increased its revenue by 68%. That's well above most other pre-profit companies. So the hefty 81% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling TruFin stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We doubt TruFin shareholders are happy with the loss of 81% over twelve months. That falls short of the market, which lost 11%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 40%, 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. It's always interesting to track share price performance over the longer term. But to understand TruFin better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for TruFin you should be aware of, and 1 of them is significant.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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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. Thank you for reading.
