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Did Changing Sentiment Drive eMagin's (NYSEMKT:EMAN) Share Price Down A Painful 84%?

Simply Wall St

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 consider, for a moment, the misfortune of eMagin Corporation (NYSEMKT:EMAN) investors who have held the stock for three years as it declined a whopping 84%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And the ride hasn't got any smoother in recent times over the last year, with the price 71% lower in that time. The silver lining is that the stock is up 2.4% in about a week.

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

See our latest analysis for eMagin

Given that eMagin didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, eMagin grew revenue at 5.2% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 46%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

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

AMEX:EMAN Income Statement, September 23rd 2019

Take a more thorough look at eMagin's financial health with this free report on its balance sheet.

A Different Perspective

Investors in eMagin had a tough year, with a total loss of 71%, against a market gain of about 3.0%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 29% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of eMagin's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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 US exchanges.

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.

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. Thank you for reading.