Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Orcoda Limited (ASX:ODA) for five years would be nursing their metaphorical wounds since the share price dropped 95% in that time. The falls have accelerated recently, with the share price down 50% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 23% in the same timeframe.
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.
Orcoda wasn't profitable in the last twelve months, 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. 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 five years Orcoda saw its revenue shrink by 26% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 44% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Orcoda stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that Orcoda shareholders have received a total shareholder return of 16% over the last year. Notably the five-year annualised TSR loss of 44% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Orcoda better, we need to consider many other factors. For instance, we've identified 5 warning signs for Orcoda (1 can't be ignored) that you should be aware of.
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 spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.
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