Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Imagine if you held Codere, S.A. (BME:CDR) for half a decade as the share price tanked 96%. And some of the more recent buyers are probably worried, too, with the stock falling 62% in the last year. Furthermore, it's down 57% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 26% in the same timeframe.
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.
Given that Codere 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 half a decade Codere reduced its trailing twelve month revenue by 1.6% for each year. While far from catastrophic that is not good. If a business loses money, you want it to grow, so no surprises that the share price has dropped 48% each year in that time. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. Fear of becoming a 'bagholder' may be keeping people away from this stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Codere's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 21% in the twelve months, Codere shareholders did even worse, losing 62%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 48% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Codere better, we need to consider many other factors. Even so, be aware that Codere is showing 1 warning sign in our investment analysis , you should know about...
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ES exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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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