Yahoo Finance Investors three-year losses grow to 88% as the stock sheds UK£2.7m this past week
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 Versarien plc (LON:VRS) investors who have held the stock for three years as it declined a whopping 88%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 60% in the last year. More recently, the share price has dropped a further 29% in a month. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Since Versarien has shed UK£2.7m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
See our latest analysis for Versarien
Because Versarien 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years Versarien saw its revenue shrink by 6.8% per year. That is not a good result. Having said that the 23% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. Don't let a share price decline ruin your calm. You make better decisions when you're calm.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Versarien'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 lost about 27% in the twelve months, Versarien shareholders did even worse, losing 60%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.5% over the last half decade. 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 Versarien better, we need to consider many other factors. For instance, we've identified 3 warning signs for Versarien (2 can't be ignored) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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