Shareholders in Demae-CanLtd (TSE:2484) have lost 86%, as stock drops 14% this past week

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Demae-Can Co.,Ltd (TSE:2484) during the five years that saw its share price drop a whopping 86%. And some of the more recent buyers are probably worried, too, with the stock falling 27% in the last year. On top of that, the share price is down 14% in the last week. 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.

After losing 14% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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Demae-CanLtd 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 hope 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 half decade, Demae-CanLtd saw its revenue increase by 26% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 13% each year, in the same time period. You'd have to assume the market is worried that profits won't come soon enough. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.

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

This free interactive report on Demae-CanLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 0.4% in the last year, Demae-CanLtd shareholders lost 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 13% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Demae-CanLtd , and understanding them should be part of your investment process.

Of course Demae-CanLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.