Strong week for ColowideLtd (TSE:7616) shareholders doesn't alleviate pain of one-year loss

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Colowide Co.,Ltd. (TSE:7616) shareholders over the last year, as the share price declined 27%. That's well below the market return of 11%. On the bright side, the stock is actually up 2.2% in the last three years. The falls have accelerated recently, with the share price down 12% in the last three months.

On a more encouraging note the company has added JP¥7.7b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

View our latest analysis for ColowideLtd

While ColowideLtd made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last twelve months, ColowideLtd increased its revenue by 9.1%. While that may seem decent it isn't great considering the company is still making a loss. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 27% in a year. It's important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Investors in ColowideLtd had a tough year, with a total loss of 27% (including dividends), against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand ColowideLtd better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for ColowideLtd you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.