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It’s not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. We wouldn’t blame Prairie Provident Resources Inc. (TSE:PPR) shareholders if they were still in shock after the stock dropped like a lead balloon, down 82% in just one year. That’d be enough to make even the strongest stomachs churn. Prairie Provident Resources hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it’s down 61% in about a quarter. That’s not much fun for holders.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Because Prairie Provident Resources is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Prairie Provident Resources saw its revenue grow by 10.0%. That’s not a very high growth rate considering it doesn’t make profits. Nonetheless, it’s fair to say the 82% share price implosion is unexpected.. We’d venture this growth was too low to give holders confidence that profitability is on the horizon. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While Prairie Provident Resources shareholders are down 82% for the year, the market itself is up 0.6%. 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. With the stock down 61% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. If you would like to research Prairie Provident Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Prairie Provident Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.