It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Appian Corporation (NASDAQ:APPN); the share price is down a whopping 74% in the last three years. That'd be enough to cause even the strongest minds some disquiet. The falls have accelerated recently, with the share price down 27% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since Appian has shed US$127m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Because Appian 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.
Over three years, Appian grew revenue at 21% per year. That is faster than most pre-profit companies. So why has the share priced crashed 20% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Appian is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Appian will earn in the future (free analyst consensus estimates)
A Different Perspective
Investors in Appian had a tough year, with a total loss of 4.6%, against a market gain of about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Appian better, we need to consider many other factors. For example, we've discovered 1 warning sign for Appian that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.