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Easy Come, Easy Go: How ADOMANI (NASDAQ:ADOM) Shareholders Got Unlucky And Saw 80% Of Their Cash Evaporate

Simply Wall St

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As every investor would know, you don't hit a homerun every time you swing. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a ADOMANI, Inc. (NASDAQ:ADOM) shareholder over the last year, since the stock price plummeted 80% in that time. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. ADOMANI hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 19% 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.

Check out our latest analysis for ADOMANI

Because ADOMANI is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

ADOMANI grew its revenue by 459% over the last year. That's well above most other pre-profit companies. So the hefty 80% 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.

Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

NasdaqCM:ADOM Income Statement, May 28th 2019

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think ADOMANI will earn in the future (free profit forecasts).

A Different Perspective

While ADOMANI shareholders are down 80% for the year, the market itself is up 4.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 19% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. If you would like to research ADOMANI in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.