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 I-Mab (NASDAQ:IMAB) shareholder over the last year, since the stock price plummeted 78% in that time. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Notably, shareholders had a tough run over the longer term, too, with a drop of 73% in the last three years. More recently, the share price has dropped a further 29% in a month.

Since I-Mab has shed US$63m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for I-Mab

Because I-Mab made a loss in the last twelve months, 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. 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.

I-Mab's revenue didn't grow at all in the last year. In fact, it fell 92%. That looks like a train-wreck result to investors far and wide. If you need more proof of that, check the share price. (Hint: it tanked 78%). Our mindset doesn't have a lot of time for stocks like this. A healthy aversion to bagholding (holding potentially worthless stocks) sees many shareholders avoid buying shares like this, rightly or wrongly.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

I-Mab is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for I-Mab in this interactive graph of future profit estimates.

A Different Perspective

The last twelve months weren't great for I-Mab shares, which performed worse than the market, costing holders 78%. Meanwhile, the broader market slid about 8.3%, likely weighing on the stock. Shareholders have lost 20% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand I-Mab better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with I-Mab , and understanding them should be part of your investment process.

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.

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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.