Shareholders in ADS-TEC Energy (NASDAQ:ADSE) are in the red if they invested a year ago
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in ADS-TEC Energy PLC (NASDAQ:ADSE) have tasted that bitter downside in the last year, as the share price dropped 34%. That's well below the market decline of 8.4%. Because ADS-TEC Energy hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 20% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 9.8% in the same period.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for ADS-TEC Energy
ADS-TEC Energy 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
ADS-TEC Energy's revenue didn't grow at all in the last year. In fact, it fell 30%. That's not what investors generally want to see. The stock price has languished lately, falling 34% in a year. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at ADS-TEC Energy's financial health with this free report on its balance sheet.
A Different Perspective
We doubt ADS-TEC Energy shareholders are happy with the loss of 34% over twelve months. That falls short of the market, which lost 8.4%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 20% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for ADS-TEC Energy you should be aware of, and 1 of them is potentially serious.
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.
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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.
