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The past year for Mogo (TSE:MOGO) investors has not been profitable

It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. So we hope that those who held Mogo Inc. (TSE:MOGO) during the last year don't lose the lesson, in addition to the 86% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. Even if you look out three years, the returns are still disappointing, with the share price down73% in that time. The falls have accelerated recently, with the share price down 67% in the last three months. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Mogo

Mogo wasn't profitable in the last twelve months, 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Mogo grew its revenue by 73% over the last year. That's a strong result which is better than most other loss making companies. So the hefty 86% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

This free interactive report on Mogo's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Mogo shareholders are down 86% for the year, falling short of the market return. Meanwhile, the broader market slid about 1.4%, likely weighing on the stock. Shareholders have lost 20% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Mogo better, we need to consider many other factors. For instance, we've identified 5 warning signs for Mogo (1 makes us a bit uncomfortable) that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.