Easy Come, Easy Go: How Walcom Group (LON:WALG) Shareholders Got Unlucky And Saw 73% Of Their Cash Evaporate
As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Walcom Group Limited (LON:WALG) investors who have held the stock for three years as it declined a whopping 73%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. Unhappily, the share price slid 14% in the last week.
View our latest analysis for Walcom Group
Because Walcom Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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.
In the last three years Walcom Group saw its revenue shrink by 15% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 36%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
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 Walcom Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Walcom Group had a tough year, with a total loss of 20%, against a market gain of about 19%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. We realise that Buffett 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 5 warning signs for Walcom Group (3 are concerning!) that you should be aware of before investing here.
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 GB exchanges.
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.
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