The terrible announcement from BLUR Group (LON:BLUR) yesterday absolutely pummelled the stock price, down 40% on the day.  After an already dramatic drawdown from its recent highs this was salt in the wounds of optimistic investors in the stock.  This is a company which had been heavily promoted by the broker community to private investors and many have been badly burned.

At Stockopedia we are all about finding companies with sound fundamental and technical backing.   We promote the investment preferentially into good, cheap, improving stocks rather than expensive, speculative, deteriorating stocks.   The law of averages, and a wealth of literature shows that investing in the former is a far more lucrative pastime than investing in the latter.  Unfortunately, we humans are addicted to a good narrative, and it makes us susceptible to believe the hype around story stocks like Blur.

 While not everyone invests solely using smart data like we do,  we do believe the insights from the Stockopedia StockReports can keep even story driven investors out of some of the worst potential investments on the AIM market.   Blur Group’s StockReport has been something of a ‘train wreck’ in recent months and has been filled with red flags.  

In order that subscribers can learn from this episode we’ve highlighted half a dozen of these ‘red flags’ in the following report.  Whenever you see a set of these flags in a stock you own or are considering buying remember that you are fighting statistics.  Think twice, there are plenty more fish in the sea.

1. Extreme Valuation

Unfortunately for so many Blur Group shareholders the company’s valuation has been propped up by hype and promise.  At its peak (graphic right) the company was valued more expensively than 98% of the market according to the Stockopedia ValueRank.

With no earnings or dividends, the company couldn’t call on traditional valuation metrics like the P/E or Yield to cushion a fall, and other metrics like Price to Sales and Price to Book were at nosebleed levels.  The ‘traffic lights’ in the graphic are clearly ‘red’ indicating the stock ranked very poorly versus the market and its sector peer group. When investing, it pays to remember that value investing beats glamour investing - Cheap stocks beat expensive stocks.

2. Dubious Earnings Quality

While Blur Group has had no profits to speak…

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