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Investors Who Bought IBC Advanced Alloys (CVE:IB) Shares Five Years Ago Are Now Down 82%

Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding IBC Advanced Alloys Corp. (CVE:IB) during the five years that saw its share price drop a whopping 82%. We also note that the stock has performed poorly over the last year, with the share price down 35%. The falls have accelerated recently, with the share price down 20% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 27% in the same timeframe.

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.

See our latest analysis for IBC Advanced Alloys

Because IBC Advanced Alloys 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. 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 five years, IBC Advanced Alloys grew its revenue at 3.3% 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 29%, compound, over five years) suggests the market is very disappointed with this level of growth. We'd be pretty cautious about this one, although the sell-off may be too severe. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

TSXV:IB Income Statement March 30th 2020
TSXV:IB Income Statement March 30th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on IBC Advanced Alloys's earnings, revenue and cash flow.

A Different Perspective

We regret to report that IBC Advanced Alloys shareholders are down 35% for the year. Unfortunately, that's worse than the broader market decline of 24%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 29% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for IBC Advanced Alloys (2 are potentially serious!) that you should be aware of before investing here.

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 CA exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.

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