Enad Global 7 (STO:EG7 investor three-year losses grow to 84% as the stock sheds kr227m this past week

It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Enad Global 7 AB (publ) (STO:EG7) investors who have held the stock for three years as it declined a whopping 84%. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 46%, so we doubt many shareholders are delighted. 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.

If the past week is anything to go by, investor sentiment for Enad Global 7 isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Enad Global 7

While Enad Global 7 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. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over three years, Enad Global 7 grew revenue at 41% 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 down 22% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.

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

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Enad Global 7 will earn in the future (free profit forecasts).

A Different Perspective

Investors in Enad Global 7 had a tough year, with a total loss of 46% (including dividends), against a market gain of about 4.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For example, we've discovered 2 warning signs for Enad Global 7 that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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