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Loss-making Made.com Group (LON:MADE) sheds a further UK£77m, taking total shareholder losses to 89% over 1 year

The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Made.com Group Plc (LON:MADE) shareholder over the last year, since the stock price plummeted 89% in that time. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Because Made.com Group hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 67% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

If the past week is anything to go by, investor sentiment for Made.com Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Made.com Group

Made.com Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last twelve months, Made.com Group increased its revenue by 50%. That's well above most other pre-profit companies. So the hefty 89% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We doubt Made.com Group shareholders are happy with the loss of 89% over twelve months. That falls short of the market, which lost 3.1%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 67%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Made.com Group better, we need to consider many other factors. For example, we've discovered 3 warning signs for Made.com Group (1 shouldn't be ignored!) that you should be aware of before investing here.

But note: Made.com Group 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 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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