As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So we hope that those who held eve Sleep Plc (LON:EVE) during the last year don't lose the lesson, in addition to the 83% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Because eve Sleep hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 44% in the last 90 days.
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.
eve Sleep 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, eve Sleep increased its revenue by 25%. We think that is pretty nice growth. However, it seems like the market wanted more, since the share price is down 83%. One fear might be that the company might be losing too much money and will need to raise more. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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
Given that the market gained 2.9% in the last year, eve Sleep shareholders might be miffed that they lost 83%. 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 44% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course eve Sleep 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 GB exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.