Novavax, Inc. (NASDAQ:NVAX) shareholders will doubtless be very grateful to see the share price up 205% in the last quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 91% in that time. So we don't gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Novavax isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 five years Novavax saw its revenue shrink by 3.9% per year. That's not what investors generally want to see. If a business loses money, you want it to grow, so no surprises that the share price has dropped 38% each year in that time. We're generally averse to companies with declining revenues, but we're not alone in that. Fear of becoming a 'bagholder' may be keeping people away from this stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's good to see that Novavax has rewarded shareholders with a total shareholder return of 13% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 38% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Novavax better, we need to consider many other factors. For instance, we've identified 4 warning signs for Novavax (1 is potentially serious) that you should be aware of.
We will like Novavax better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 email@example.com. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.