Yahoo Finance Lake Resources (ASX:LKE) dips 13% this week as increasing losses might not be inspiring confidence among its investors
As every investor would know, you don't hit a homerun every time you swing. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held Lake Resources NL (ASX:LKE) during the last year don't lose the lesson, in addition to the 88% hit to the value of their shares. A loss like this is a stark reminder that portfolio diversification is important. To make matters worse, the returns over three years have also been really disappointing (the share price is 83% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 46% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
View our latest analysis for Lake Resources
Lake Resources 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Lake Resources grew its revenue by 7.7% over the last year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the 88% share price implosion is unexpected.. Clearly the market was expecting better, and this may blow out projections of profitability. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Lake Resources stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Lake Resources had a tough year, with a total loss of 88%, against a market gain of about 8.8%. 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. On the bright side, long term shareholders have made money, with a gain of 1.6% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand Lake Resources better, we need to consider many other factors. For example, we've discovered 4 warning signs for Lake Resources that you should be aware of before investing here.
But note: Lake Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.
