Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Centric Health Corporation (TSE:CHH) investors who have held the stock for three years as it declined a whopping 82%. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 52% in the last year. The silver lining is that the stock is up 3.3% in about a week.
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.
View our latest analysis for Centric Health
Given that Centric Health 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, Centric Health’s revenue dropped 16% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 44% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. It’s worth remembering that investors call buying a steeply falling share price ‘catching a falling knife’ because it is a dangerous pass time.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
TSX:CHH Income Statement, February 26th 2020
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market gained around 3.7% in the last year, Centric Health shareholders lost 52%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% 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. For instance, we’ve identified 4 warning signs for Centric Health (1 is potentially serious) that you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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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