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As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So we hope that those who held Asmallworld AG (VTX:ASWN) during the last year don't lose the lesson, in addition to the 76% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on Asmallworld because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
Check out our latest analysis for Asmallworld
Because Asmallworld is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Asmallworld increased its revenue by 75%. That's a strong result which is better than most other loss making companies. So the hefty 76% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, markets do over-react so share price drop may be too harsh.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
If you are thinking of buying or selling Asmallworld stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While Asmallworld shareholders are down 76% for the year, the market itself is up 8.9%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 14%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.