Easy Come, Easy Go: How Chaparral Energy (NYSE:CHAP) Shareholders Got Unlucky And Saw 93% Of Their Cash Evaporate

As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. It must have been painful to be a Chaparral Energy, Inc. (NYSE:CHAP) shareholder over the last year, since the stock price plummeted 93% in that time. A loss like this is a stark reminder that portfolio diversification is important. Chaparral Energy may have better days ahead, of course; we've only looked at a one year period. Furthermore, it's down 78% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Chaparral Energy

Chaparral Energy 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In just one year Chaparral Energy saw its revenue fall by 4.8%. That's not what investors generally want to see. The market obviously agrees, since the share price tanked 93%. Holders should not lose the lesson: loss making companies should grow revenue. But markets do over-react, so there opportunity for investors who are willing to take the time to dig deeper and understand the business.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We doubt Chaparral Energy shareholders are happy with the loss of 93% over twelve months. That falls short of the market, which lost 13%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 78% over the last three months, the market doesn't seem to believe that the company has solved all its problems. 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. For instance, we've identified 3 warning signs for Chaparral Energy that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.