Ambarella (NASDAQ:AMBA) shareholders have endured a 49% loss from investing in the stock three years ago
Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Ambarella, Inc. (NASDAQ:AMBA) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 24%. And over the last year the share price fell 32%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 20% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Ambarella
Ambarella 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, Ambarella saw its revenue grow by 1.7% per year, compound. That's not a very high growth rate considering it doesn't make profits. The stock dropped 14% during that time. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Ambarella is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Ambarella stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Investors in Ambarella had a tough year, with a total loss of 32%, against a market gain of about 32%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Ambarella you should be aware of.
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 American 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.
