March 29, 2024

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The ADF Group (TSE:DRX) Share Price Is Down 70% So Some Shareholders Are Wishing They Sold

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of ADF Group Inc. (TSE:DRX) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 70% drop in the share price over that period. And over the last year the share price fell 30%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 37% in the last three months. But this could be related to the weak market, which is down 22% in the same period.

Check out our latest analysis for ADF Group

Given that ADF Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, ADF Group saw its revenue grow by 10% per year, compound. That’s a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 33% per year. To be frank we’re surprised to see revenue growth and share price growth diverge so strongly. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

TSX:DRX Income Statement April 8th 2020

If you are thinking of buying or selling ADF Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 19% in the twelve months, ADF Group shareholders did even worse, losing 29% (even including dividends) . 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 18% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We’ve spotted 3 warning signs for ADF Group you should be aware of, and 1 of them can’t be ignored.

But note: ADF 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 CA 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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