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Would Shareholders Who Purchased WeedMD's (CVE:WMD) Stock Three Years Be Happy With The Share price Today?

·3 min read

WeedMD Inc. (CVE:WMD) shareholders should be happy to see the share price up 17% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 77%. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.

View our latest analysis for WeedMD

Because WeedMD 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

In the last three years, WeedMD saw its revenue grow by 79% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 21% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

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

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

Take a more thorough look at WeedMD's financial health with this free report on its balance sheet.

A Different Perspective

WeedMD shareholders are down 14% for the year, but the broader market is up 44%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 21% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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 instance, we've identified 4 warning signs for WeedMD 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.

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.

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