Every investor on earth makes bad calls sometimes. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Debao Property Development Ltd. (SGX:BTF), who have seen the share price tank a massive 83% over a three year period. That’d be enough to cause even the strongest minds some disquiet. And the share price decline continued over the last week, dropping some 62%.
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.
Debao Property Development isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years, Debao Property Development’s revenue dropped 31% per year. That’s definitely a weaker result than most pre-profit companies report. And as you might expect the share price has been weak too, dropping at a rate of 45% per year. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as ‘trying to catch a falling knife’. Think about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Although it hurts that Debao Property Development returned a loss of 18% in the last twelve months, the broader market was actually worse, returning a loss of 23%. Of far more concern is the 26% p.a. loss served to shareholders over the last five years. This sort of share price action isn’t particularly encouraging, but at least the losses are slowing. 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. Even so, be aware that Debao Property Development is showing 5 warning signs in our investment analysis , and 4 of those shouldn’t be ignored…
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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