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Did You Manage To Avoid Memex's (CVE:OEE) Devastating 90% Share Price Drop?

It's not possible to invest over long periods without making some bad investments. But really bad investments should be rare. So spare a thought for the long term shareholders of Memex Inc. (CVE:OEE); the share price is down a whopping 90% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The good news is that the stock is up 33% in the last 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.

See our latest analysis for Memex

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Memex isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good 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, Memex saw its revenue grow by 7.0% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 54%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Before considering a purchase, take a look at the losses the company is racking up.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

TSXV:OEE Income Statement, October 2nd 2019
TSXV:OEE Income Statement, October 2nd 2019

Take a more thorough look at Memex's financial health with this free report on its balance sheet.

A Different Perspective

Memex shareholders are down 11% for the year, but the market itself is up 1.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 20% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of Memex's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like Memex better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

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.

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. Thank you for reading.