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Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of IR Resources Limited (HKG:8186), who have seen the share price tank a massive 94% 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 60% in the last year. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days.
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.
Given that IR Resources 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 three years IR Resources saw its revenue shrink by 25% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 60% per year. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as ‘trying to catch a falling knife’. Think about it.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at IR Resources’s financial health with this free report on its balance sheet.
A Different Perspective
The last twelve months weren’t great for IR Resources shares, which performed worse than the market, costing holders 60%. The market shed around 9.8%, no doubt weighing on the stock price. Unfortunately, the longer term story isn’t pretty, with investment losses running at 60% per year over three years. We’d need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. You could get a better understanding of IR Resources’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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 HK 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 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. Thank you for reading.