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Even the best stock pickers will make plenty of bad investments. And unfortunately for Yunji Inc. (NASDAQ:YJ) shareholders, the stock is a lot lower today than it was a year ago. To wit the share price is down 56% in that time. We wouldn't rush to judgement on Yunji because we don't have a long term history to look at. Furthermore, it's down 43% in about a quarter. That's not much fun for holders.
Yunji isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Yunji's revenue didn't grow at all in the last year. In fact, it fell 54%. If you think that's a particularly bad result, you're statistically on the money It's no surprise, then, that investors dumped the stock like it was garbage, sending the share price down 56%. Buying shares in loss making companies with falling revenue is often called speculation, not investing. This company will really need to improve on the numbers before we get excited about it.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Yunji's financial health with this free report on its balance sheet.
A Different Perspective
Given that the market gained 40% in the last year, Yunji shareholders might be miffed that they lost 56%. 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. The share price decline has continued throughout the most recent three months, down 43%, 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. 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. Case in point: We've spotted 1 warning sign for Yunji you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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