Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Respiri Limited (ASX:RSH) over the last year knows what a loser feels like. To wit the share price is down 62% in that time. On the other hand, the stock is actually up 11% over three years. Furthermore, it's down 25% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 23% in the same period.
Respiri 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
In the last year Respiri saw its revenue grow by 111%. That's a strong result which is better than most other loss making companies. Meanwhile, the share price slid 62%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Respiri's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 12% in the twelve months, Respiri shareholders did even worse, losing 62%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.0% over the last half decade. We realise that Baron Rothschild 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 business. It's always interesting to track share price performance over the longer term. But to understand Respiri better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Respiri (of which 1 is significant!) you should know about.
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 AU 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.