Money isn't as important as health and happiness10 Apr 2025 17:13
Https://simplywall.st/stocks/gb/retail/lse-asc/asos-shares/news/asos-lonasc-shareholders-incur-further-losses-as-stock-decli
Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held ASOS Plc (LON:ASC) for five whole years - as the share price tanked 89%. And we doubt long term believers are the only worried holders, since the stock price has declined 27% over the last twelve months. The falls have accelerated recently, with the share price down 37% in the last three months. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Since ASOS has shed UK£36m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
ASOS wasn't profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, ASOS saw its revenue increase by 1.5% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 14%, compound, over five years) suggests the market is very disappointed with this level of growth. We'd be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.
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