Some stocks are best avoided. We don’t wish catastrophic capital loss on anyone. Imagine if you held DarioHealth Corp. (NASDAQ:DRIO) for half a decade as the share price tanked 90%. And we doubt long term believers are the only worried holders, since the stock price has declined 46% over the last twelve months.
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.
DarioHealth isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
Over five years, DarioHealth grew its revenue at 50% per year. That’s better than most loss-making companies. So on the face of it we’re really surprised to see the share price has averaged a fall of 37% each year, in the same time period. It could be that the stock was over-hyped before. We’d recommend carefully checking for indications of future growth – and balance sheet threats – before considering a purchase.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on DarioHealth’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 9.1% in the last year, DarioHealth shareholders lost 46%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 37% per year over five years. 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. It’s always interesting to track share price performance over the longer term. But to understand DarioHealth better, we need to consider many other factors. Take risks, for example – DarioHealth has 5 warning signs (and 2 which are significant) we think you should know about.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.