Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held NeuroMetrix, Inc. (NASDAQ:NURO) for five whole years - as the share price tanked 99%. And it's not just long term holders hurting, because the stock is down 56% in the last year. More recently, the share price has dropped a further 24% in a month.
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.
Because NeuroMetrix made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong 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 half decade, NeuroMetrix saw its revenue increase by 20% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 63% throughout that time. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
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 NeuroMetrix stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in NeuroMetrix had a tough year, with a total loss of 56%, against a market gain of about 30%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 63% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of NeuroMetrix's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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.
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