It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. It must have been painful to be a Golden Bull Limited (NASDAQ:DNJR) shareholder over the last year, since the stock price plummeted 83% in that time. That'd be a striking reminder about the importance of diversification. Golden Bull hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 79% in the last 90 days.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Because Golden Bull 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 year Golden Bull saw its revenue grow by 13%. That's not a very high growth rate considering it doesn't make profits. Even so you could argue that it's surprising that the share price has tanked 83%. We'd venture this growth was too low to give holders confidence that profitability is on the horizon. But if it will make money, albeit later than previously believed, this could be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While Golden Bull shareholders are down 83% for the year, the market itself is up 7.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 79% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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