Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of boohoo group plc (LON:BOO) investors who have held the stock for three years as it declined a whopping 89%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. On top of that, the share price is down 7.2% in the last week. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for boohoo group
Because boohoo group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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, boohoo group saw its revenue grow by 1.5% per year, compound. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 24% per year does seem a bit harsh! We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
boohoo group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for boohoo group in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 0.1% in the twelve months, boohoo group shareholders did even worse, losing 17%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, longer term shareholders are suffering worse, given the loss of 13% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.