Yahoo Finance Introducing Emerald Health Therapeutics (CVE:EMH), The Stock That Collapsed 95%
It's nice to see the Emerald Health Therapeutics, Inc. (CVE:EMH) share price up 13% in a week. But that hardly compensates for the shocking decline over the last twelve months. Indeed, the share price is down a whopping 95% in the last year. It's not uncommon to see a bounce after a drop like that. The bigger issue is whether the company can sustain the momentum in the long term.
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 Emerald Health Therapeutics
Because Emerald Health Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Emerald Health Therapeutics grew its revenue by 1253% over the last year. That's a strong result which is better than most other loss making companies. So the hefty 95% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Emerald Health Therapeutics's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that Emerald Health Therapeutics shareholders are down 95% for the year. Unfortunately, that's worse than the broader market decline of 9.3%. 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 17% 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 Emerald Health Therapeutics better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Emerald Health Therapeutics you should be aware of, and 1 of them makes us a bit uncomfortable.
We will like Emerald Health Therapeutics 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.
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.
