Even the best investor on earth makes unsuccessful investments. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held electroCore, Inc. (NASDAQ:ECOR) during the last year don't lose the lesson, in addition to the 73% hit to the value of their shares. That'd be enough to make even the strongest stomachs churn. Because electroCore hasn't been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 26% in the last three months.
Given that electroCore 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. 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.
In the last year electroCore saw its revenue grow by 142%. That's a strong result which is better than most other loss making companies. So the hefty 73% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on electroCore
A Different Perspective
Given that the market gained 26% in the last year, electroCore shareholders might be miffed that they lost 73%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 26% 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. 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 5 warning signs for electroCore you should be aware of, and 1 of them is a bit unpleasant.
electroCore is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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