As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Tomizone Limited (ASX:TOM), who have seen the share price tank a massive 93% over a three year period. That would be a disturbing experience. And more recent buyers are having a tough time too, with a drop of 56% in the last year. Shareholders have had an even rougher run lately, with the share price down 30% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Tomizone isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Tomizone grew revenue at 32% per year. That is faster than most pre-profit companies. So why has the share priced crashed 59% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn’t lead to profits. If the company is low on cash, it may have to raise capital soon.
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.
Take a more thorough look at Tomizone’s financial health with this free report on its balance sheet.
A Different Perspective
Over the last year, Tomizone shareholders took a loss of 56%. In contrast the market gained about 11%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn’t as bad as the 57% per annum loss investors have suffered over the last three years. We’d need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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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.