While not a mind-blowing move, it is good to see that the Earth Alive Clean Technologies Inc. (CVE:EAC) share price has gained 24% in the last three months. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 81%. So we’re relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a 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.
Check out our latest analysis for Earth Alive Clean Technologies
Given that Earth Alive Clean Technologies 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. 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 three years, Earth Alive Clean Technologies saw its revenue grow by 19% per year, compound. That’s a pretty good rate of top-line growth. So it’s hard to believe the share price decline of 42% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don’t lose the lesson.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
TSXV:EAC Income Statement, March 12th 2020
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
The last twelve months weren’t great for Earth Alive Clean Technologies shares, which performed worse than the market, costing holders 54%. Meanwhile, the broader market slid about 13%, likely weighing on the stock. Shareholders have lost 42% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. 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. 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. Case in point: We’ve spotted 7 warning signs for Earth Alive Clean Technologies you should be aware of, and 2 of them shouldn’t be ignored.
We will like Earth Alive Clean Technologies 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 CA exchanges.
If you spot an error that warrants correction, please contact the editor at [email protected]. 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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