paragon GmbH KGaA's(ETR:PGN) Share Price Is Down 85% Over The Past Three Years.

By
Simply Wall St
Published
November 23, 2020

As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of paragon GmbH & Co. KGaA (ETR:PGN) investors who have held the stock for three years as it declined a whopping 85%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The more recent news is of little comfort, with the share price down 23% in a year. On the other hand the share price has bounced 8.2% over the last week.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for paragon GmbH KGaA

paragon GmbH KGaA 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, paragon GmbH KGaA saw its revenue grow by 12% per year, compound. That's a pretty good rate of top-line growth. So it seems unlikely the 23% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

XTRA:PGN Earnings and Revenue Growth November 23rd 2020

If you are thinking of buying or selling paragon GmbH KGaA stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

paragon GmbH KGaA shareholders are down 23% for the year, but the market itself is up 4.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand paragon GmbH KGaA better, we need to consider many other factors. For instance, we've identified 3 warning signs for paragon GmbH KGaA (2 are a bit concerning) that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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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.
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