Over the last month the Lightning eMotors, Inc. (NYSE:ZEV) has been much stronger than before, rebounding by 38%. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 39% in a year, falling short of the returns you could get by investing in an index fund.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
Lightning eMotors isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Lightning eMotors saw its revenue grow by 68%. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 39% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Lightning eMotors' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Lightning eMotors shareholders are down 39% for the year, even worse than the market loss of 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 7.2% 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. It's always interesting to track share price performance over the longer term. But to understand Lightning eMotors better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Lightning eMotors you should know about.
Of course Lightning eMotors 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 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.
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