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Over the last month the Yü Group PLC (LON:YU.) has been much stronger than before, rebounding by 48%. But that is meagre solace when you consider how the price has plummeted over the last year. During that time the share price has plummeted like a stone, down 81%. It's not uncommon to see a bounce after a drop like that. The important thing is whether the company can turn it around, longer term.
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.
Yü Group 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. 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.
In the last year Yü Group saw its revenue grow by 77%. That's well above most other pre-profit companies. So the hefty 81% 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. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Yü Group shareholders are down 81% for the year, falling short of the market return. Meanwhile, the broader market slid about 1.9%, likely weighing on the stock. The three-year loss of 11% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before spending more time on Yü Group it might be wise to click here to see if insiders have been buying or selling shares.
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 GB 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 firstname.lastname@example.org. 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.