As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Bang & Olufsen a/s (CPH:BO) investors who have held the stock for three years as it declined a whopping 81%. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 64% in a year. The falls have accelerated recently, with the share price down 48% in the last three months.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
See our latest analysis for Bang & Olufsen
Given that Bang & Olufsen 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. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years Bang & Olufsen saw its revenue shrink by 7.0% per year. That’s not what investors generally want to see. The share price fall of 43% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. We’re generally averse to companies with declining revenues, but we’re not alone in that. Don’t let a share price decline ruin your calm. You make better decisions when you’re calm.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
CPSE:BO Income Statement May 7th 2020
If you are thinking of buying or selling Bang & Olufsen stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Bang & Olufsen shareholders are down 64% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 19% per year over five years. 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. 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. For instance, we’ve identified 1 warning sign for Bang & Olufsen 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 DK 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.