This month, we saw the Broo Limited (ASX:BEE) up an impressive 56%. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 95% in the last three years. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Broo 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 three years, Broo grew revenue at 44% 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 63% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Broo stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for Broo shares, which performed worse than the market, costing holders 48%. Meanwhile, the broader market slid about 9.5%, likely weighing on the stock. However, the loss over the last year isn't as bad as the 63% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. It's always interesting to track share price performance over the longer term. But to understand Broo better, we need to consider many other factors. To that end, you should learn about the 6 warning signs we've spotted with Broo (including 2 which is make us uncomfortable) .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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