We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding NeuroMetrix, Inc. (NASDAQ:NURO) during the five years that saw its share price drop a whopping 99%. And some of the more recent buyers are probably worried, too, with the stock falling 41% in the last year. On top of that, the share price has dropped a further 25% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, NeuroMetrix moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
In contrast to the share price, revenue has actually increased by 27% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
It is of course excellent to see how NeuroMetrix has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Investors in NeuroMetrix had a tough year, with a total loss of 41%, against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 58% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before spending more time on NeuroMetrix it might be wise to click here to see if insiders have been buying or selling shares.
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 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.