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It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of TerrAscend Corp. (TSE:TSND); the share price is down a whopping 89% in the last three years. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 60% lower in that time. The falls have accelerated recently, with the share price down 49% in the last three months. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for TerrAscend
TerrAscend isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, TerrAscend saw its revenue grow by 21% per year, compound. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 24% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
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 TerrAscend stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 19% in the last year, TerrAscend shareholders lost 60%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - TerrAscend has 2 warning signs we think you should be aware of.