Investors are selling off CDON (STO:CDON), lack of profits no doubt contribute to shareholders one-year loss

Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of CDON AB (STO:CDON) have suffered share price declines over the last year. The share price is down a hefty 66% in that time. We wouldn't rush to judgement on CDON because we don't have a long term history to look at. Even worse, it's down 41% in about a month, which isn't fun at all.

Since CDON has shed kr472m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for CDON

CDON 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. 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 does expect good top-line growth.

In just one year CDON saw its revenue fall by 35%. That's not what investors generally want to see. The share price drop of 66% is understandable given the company doesn't have profits to boast of. Having said that, if growth is coming in the future, the stock may have better days ahead. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

Given that the market gained 14% in the last year, CDON shareholders might be miffed that they lost 66%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 40% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with CDON , and understanding them should be part of your investment process.

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 SE 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.