Introducing True Leaf Brands (CNSX:MJ), The Stock That Dropped 38% In The Last Year

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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in True Leaf Brands Inc. (CNSX:MJ) have tasted that bitter downside in the last year, as the share price dropped 38%. That falls noticeably short of the market return of around 1.6%. Longer term investors have fared much better, since the share price is up 27% in three years. The falls have accelerated recently, with the share price down 26% in the last three months.

View our latest analysis for True Leaf Brands

True Leaf Brands isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last twelve months, True Leaf Brands increased its revenue by 89%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 38% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

If you are thinking of buying or selling True Leaf Brands stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

True Leaf Brands shareholders are down 38% for the year, but the broader market is up 1.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 8.4% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. Before spending more time on True Leaf Brands it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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 [email protected]. 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.