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Even the best stock pickers will make plenty of bad investments. Anyone who held Nitro Software Limited (ASX:NTO) over the last year knows what a loser feels like. The share price has slid 62% in that time. We wouldn't rush to judgement on Nitro Software because we don't have a long term history to look at. And the share price decline continued over the last week, dropping some 9.1%. However, this move may have been influenced by the broader market, which fell 6.3% in that time.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Nitro Software isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 year Nitro Software saw its revenue grow by 27%. We think that is pretty nice growth. Meanwhile, the share price tanked 62%, suggesting the market had much higher expectations. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Nitro Software shareholders are down 61% for the year, even worse than the market loss of 5.6%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. Putting aside the last twelve months, it's good to see the share price has rebounded by 2.4%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Nitro Software you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.