It's not a secret that every investor will make bad investments, from time to time. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held Summit Wireless Technologies, Inc. (NASDAQ:WISA) during the last year don't lose the lesson, in addition to the 79% hit to the value of their shares. A loss like this is a stark reminder that portfolio diversification is important. Summit Wireless Technologies may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 42% in the last 90 days.
Summit Wireless Technologies isn't a profitable company, so 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Summit Wireless Technologies grew its revenue by 67% over the last year. That's a strong result which is better than most other loss making companies. So the hefty 79% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, markets do over-react so share price drop may be too harsh.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Summit Wireless Technologies's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While Summit Wireless Technologies shareholders are down 79% for the year, the market itself is up 6.0%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 42%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. You might want to assess this data-rich visualization of its 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 firstname.lastname@example.org. 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.