Murray Cod Australia (ASX:MCA investor three-year losses grow to 76% as the stock sheds AU$11m this past week

Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So consider, for a moment, the misfortune of Murray Cod Australia Limited (ASX:MCA) investors who have held the stock for three years as it declined a whopping 76%. That'd be enough to cause even the strongest minds some disquiet. And the ride hasn't got any smoother in recent times over the last year, with the price 27% lower in that time. The falls have accelerated recently, with the share price down 29% in the last three months.

Since Murray Cod Australia has shed AU$11m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Murray Cod Australia

Murray Cod Australia isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over three years, Murray Cod Australia grew revenue at 11% per year. That's a fairly respectable growth rate. So it seems unlikely the 21% share price drop (each year) is entirely about the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Murray Cod Australia's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 8.2% in the last year, Murray Cod Australia shareholders lost 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Murray Cod Australia (at least 2 which are concerning) , and understanding them should be part of your investment process.

Of course Murray Cod Australia may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.