Shareholders in ChabiotechLtd (KOSDAQ:085660) have lost 48%, as stock drops 33% this past week

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Chabiotech Co.,Ltd. (KOSDAQ:085660) share price is down 48% in the last year. That's disappointing when you consider the market declined 8.7%. We note that it has not been easy for shareholders over three years, either; the share price is down 47% in that time. Furthermore, it's down 42% in about a quarter. That's not much fun for holders.

Since ChabiotechLtd has shed ₩291b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for ChabiotechLtd

ChabiotechLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong 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 year ChabiotechLtd saw its revenue grow by 7.1%. While that may seem decent it isn't great considering the company is still making a loss. Given this lacklustre revenue growth, the share price drop of 48% seems pretty appropriate. In a hot market it's easy to forget growth is the life-blood of a loss making company. But if you buy a loss making company then you could become a loss making investor.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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

A Different Perspective

While the broader market lost about 8.7% in the twelve months, ChabiotechLtd shareholders did even worse, losing 48%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. 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. Even so, be aware that ChabiotechLtd is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Of course ChabiotechLtd 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 South Korean 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.