Even the best investor on earth makes unsuccessful investments. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Neuronetics, Inc. (NASDAQ:STIM) shareholder over the last year, since the stock price plummeted 72% in that time. A loss like this is a stark reminder that portfolio diversification is important. Neuronetics 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 54% in the last 90 days.
Given that Neuronetics 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 Neuronetics saw its revenue grow by 24%. We think that is pretty nice growth. Unfortunately, the market wanted something better, given it sent the share price 72% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on Neuronetics
A Different Perspective
While Neuronetics shareholders are down 72% for the year, the market itself is up 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 54% 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. It's always interesting to track share price performance over the longer term. But to understand Neuronetics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Neuronetics (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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