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Even the best investor on earth makes unsuccessful investments. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held Molecular Data Inc. (NASDAQ:MKD) during the last year don't lose the lesson, in addition to the 70% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn't rush to judgement on Molecular Data because we don't have a long term history to look at. More recently, the share price has dropped a further 33% in a month.
Because Molecular Data 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Molecular Data's revenue didn't grow at all in the last year. In fact, it fell 42%. That looks pretty grim, at a glance. The share price fall of 70% in a year tells the story. That's a stern reminder that profitless companies need to grow the top line, at the very least. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Molecular Data's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 37% in the last year, Molecular Data shareholders might be miffed that they lost 70%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 32% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 5 warning signs for Molecular Data (2 don't sit too well with us) that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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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