Even the best stock pickers will make plenty of bad investments. And unfortunately for Dada Nexus Limited (NASDAQ:DADA) shareholders, the stock is a lot lower today than it was a year ago. The share price has slid 68% in that time. Because Dada Nexus hasn't been listed for many years, the market is still learning about how the business performs. Even worse, it's down 19% in about a month, which isn't fun at all.
With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Dada Nexus isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
Dada Nexus grew its revenue by 14% over the last year. We think that is pretty nice growth. Unfortunately it seems investors wanted more, because the share price is down 68% in that time. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Dada Nexus is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Dada Nexus in this interactive graph of future profit estimates.
A Different Perspective
We doubt Dada Nexus shareholders are happy with the loss of 68% over twelve months. That falls short of the market, which lost 14%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 9.2%, 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Dada Nexus , and understanding them should be part of your investment process.
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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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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