It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held AppHarvest, Inc. (NASDAQ:APPH) during the last year don't lose the lesson, in addition to the 84% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on AppHarvest because we don't have a long term history to look at. Furthermore, it's down 49% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
AppHarvest 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.
AppHarvest grew its revenue by 418% over the last year. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 84% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, markets do over-react so share price drop may be too harsh.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling AppHarvest stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We doubt AppHarvest shareholders are happy with the loss of 84% over twelve months. That falls short of the market, which lost 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 49%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand AppHarvest better, we need to consider many other factors. Even so, be aware that AppHarvest is showing 4 warning signs in our investment analysis , and 1 of those is significant...
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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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.