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If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Canaan Inc. (NASDAQ:CAN) have had an unfortunate run in the last three years. Sadly for them, the share price is down 68% in that time. Unfortunately the share price momentum is still quite negative, with prices down 20% in thirty days.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Canaan
Because Canaan 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years Canaan saw its revenue shrink by 47% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 19% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Canaan stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Canaan had a tough year, with a total loss of 15%, against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 2 warning signs for Canaan that you should be aware of.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.