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 take a moment to sympathize with the long term shareholders of Clean TeQ Holdings Limited (ASX:CLQ), who have seen the share price tank a massive 81% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And the ride hasn’t got any smoother in recent times over the last year, with the price 41% lower in that time. More recently, the share price has dropped a further 30% in a month. But this could be related to poor market conditions — stocks are down 12% in the same time.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
See our latest analysis for Clean TeQ Holdings
Given that Clean TeQ Holdings 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. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Clean TeQ Holdings grew revenue at 39% per year. That is faster than most pre-profit companies. So on the face of it we’re really surprised to see the share price down 42% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn’t amount to much if the business can’t scale well. Unless the balance sheet is strong, the company might have to raise capital.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
ASX:CLQ Income Statement, March 9th 2020
Take a more thorough look at Clean TeQ Holdings’s financial health with this free report on its balance sheet.
A Different Perspective
Investors in Clean TeQ Holdings had a tough year, with a total loss of 41%, against a market gain of about 3.5%. 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. Longer term investors wouldn’t be so upset, since they would have made 8.3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Clean TeQ Holdings better, we need to consider many other factors. Even so, be aware that Clean TeQ Holdings is showing 6 warning signs in our investment analysis , and 2 of those shouldn’t be ignored…
But note: Clean TeQ Holdings 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 AU 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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