It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Xped Limited (ASX:XPE); the share price is down a whopping 98% in the last three years. That would be a disturbing experience. And more recent buyers are having a tough time too, with a drop of 67% in the last year. Furthermore, it's down 33% in about a quarter. That's not much fun for holders.
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.
Xped isn't a profitable company, so 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. 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.
Over three years, Xped grew revenue at 29% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 75% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Xped shareholders are down 67% for the year, but the broader market is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 75% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Xped 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 email@example.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. Thank you for reading.