Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Limeade, Inc. (ASX:LME) share price slid 43% over twelve months. That's well below the market return of 42%. Limeade may have better days ahead, of course; we've only looked at a one year period. It's down 50% in about a quarter.
Given that Limeade didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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.
In the last year Limeade saw its revenue grow by 19%. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 43%. You might even wonder if the share price was previously over-hyped. But if revenue keeps growing, then at a certain point the share price would likely follow.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Limeade's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 42% in the last year, Limeade shareholders might be miffed that they lost 43%. 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. It's worth noting that the last three months did the real damage, with a 50% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. 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 2 warning signs with Limeade , and understanding them should be part of your investment process.
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.
If you decide to trade Limeade, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.