Even the best stock pickers will make plenty of bad investments. And there's no doubt that AuMake International Limited (ASX:AU8) stock has had a really bad year. The share price is down a hefty 67% in that time. We wouldn't rush to judgement on AuMake International because we don't have a long term history to look at. Unhappily, the share price slid 11% in the last week.
Because AuMake International is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. 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 twelve months, AuMake International increased its revenue by 107%. That's well above most other pre-profit companies. Meanwhile, the share price slid 67%. 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). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at AuMake International's financial health with this free report on its balance sheet.
A Different Perspective
While AuMake International shareholders are down 67% for the year, the market itself is up 14%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 11% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. If you would like to research AuMake International in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: AuMake International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.