The nature of investing is that you win some, and you lose some. And unfortunately for Novatti Group Limited (ASX:NOV) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 64% in that time. On the bright side, the stock is actually up 16% in the last three years. But it's up 7.5% in the last week. But this could be related to the strong market, with stocks up around 3.5% in the same time.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Given that Novatti Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Novatti Group increased its revenue by 57%. That's well above most other pre-profit companies. In contrast the share price is down 64% over twelve months. Yes, the market can be a fickle mistress. This could mean hype has come out of the stock because the bottom line is concerning investors. We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Novatti Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Novatti Group shareholders are down 64% for the year, but the market itself is up 7.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 5 warning signs for Novatti Group (2 are a bit unpleasant) that you should be aware of.
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 AU 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.