Yahoo Finance Imagine Owning Adherium (ASX:ADR) And Trying To Stomach The 94% Share Price Drop
Adherium Limited (ASX:ADR) shareholders should be happy to see the share price up 17% in the last quarter. But only the myopic could ignore the astounding decline over three years. To wit, the share price sky-dived 94% in that time. So we're relieved for long term holders to see a bit of uplift. Only time will tell if the company can sustain the 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.
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Check out our latest analysis for Adherium
Given that Adherium 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Adherium grew revenue at 31% 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 62% a year in the same time period. The share price makes us wonder if there is an issue with profitability. 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 chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Adherium's financial health with this free report on its balance sheet.
A Different Perspective
Over the last year, Adherium shareholders took a loss of 79%. In contrast the market gained about 8.5%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 62% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. You could get a better understanding of Adherium's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Adherium better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.
