Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Nano-X Imaging Ltd. (NASDAQ:NNOX) for half a decade as the share price tanked 89%. And it’s not just long term holders hurting, because the stock is down 36% in the last year. The falls have accelerated recently, with the share price down 26% in the last three months. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Nano-X Imaging 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 hope to see good 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 half decade, Nano-X Imaging saw its revenue increase by 47% per year. That’s well above most other pre-profit companies. So it’s not at all clear to us why the share price sunk 14% throughout that time. It could be that the stock was over-hyped before. We’d recommend carefully checking for indications of future growth – and balance sheet threats – before considering a purchase.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Nano-X Imaging’s financial health with this free report on its balance sheet.
Investors in Nano-X Imaging had a tough year, with a total loss of 36%, against a market gain of about 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 14% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We’ve spotted 1 warning sign for Nano-X Imaging you should be aware of.
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 American 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.