Shareholders in iA (KOSDAQ:038880) have lost 80%, as stock drops 11% this past week

As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of iA, Inc. (KOSDAQ:038880), who have seen the share price tank a massive 80% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 47% in the last year. The falls have accelerated recently, with the share price down 14% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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Given that iA 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, iA's revenue dropped 18% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 22%, reflects this weak fundamental performance. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at iA's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that iA shareholders are down 47% for the year. Unfortunately, that's worse than the broader market decline of 5.1%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - iA has 3 warning signs (and 1 which can't be ignored) we think you should know about.

But note: iA may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.