The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held Carbon Revolution Limited (ASX:CBR) during the last year don't lose the lesson, in addition to the 71% hit to the value of their shares. That'd be enough to make even the strongest stomachs churn. Carbon Revolution hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. More recently, the share price has dropped a further 31% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

With the stock having lost 19% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Carbon Revolution

Given that Carbon Revolution didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong 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 just one year Carbon Revolution saw its revenue fall by 2.2%. That looks pretty grim, at a glance. The market obviously agrees, since the share price tanked 71%. 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.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Carbon Revolution in this interactive graph of future profit estimates.

A Different Perspective

Given that the market gained 8.7% in the last year, Carbon Revolution 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. The share price decline has continued throughout the most recent three months, down 30%, suggesting an absence of enthusiasm from investors. 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 4 warning signs for Carbon Revolution that you should be aware of.