Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
As every investor would know, you don’t hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So we hope that those who held Cycliq Group Limited (ASX:CYQ) during the last year don’t lose the lesson, in addition to the 86% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn’t rush to judgement on Cycliq Group because we don’t have a long term history to look at. Furthermore, it’s down 50% in about a quarter. That’s not much fun for holders.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
Cycliq Group isn’t a profitable company, so it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
Cycliq Group grew its revenue by 98% over the last year. That’s a strong result which is better than most other loss making companies. So the hefty 86% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we’d venture the company has destroyed value somehow. We’d recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that’s for sure. Of course, markets do over-react so share price drop may be too harsh.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
If you are thinking of buying or selling Cycliq Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While Cycliq Group shareholders are down 86% for the year, the market itself is up 12%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 50%, 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.