Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of ShotSpotter, Inc. (NASDAQ:SSTI) have suffered share price declines over the last year. The share price has slid 51% in that time. We wouldn't rush to judgement on ShotSpotter because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 36% in the last three months.
ShotSpotter 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last twelve months, ShotSpotter increased its revenue by 33%. We think that is pretty nice growth. Meanwhile, the share price tanked 51%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling ShotSpotter stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While ShotSpotter shareholders are down 51% for the year, the market itself is up 12%. 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. With the stock down 36% 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 ShotSpotter 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 ShotSpotter may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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