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Novonix (ASX:NVX) shareholders have endured a 75% loss from investing in the stock a year ago

Even the best investor on earth makes unsuccessful investments. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame Novonix Limited (ASX:NVX) shareholders if they were still in shock after the stock dropped like a lead balloon, down 75% in just one year. A loss like this is a stark reminder that portfolio diversification is important. The silver lining (for longer term investors) is that the stock is still 52% higher than it was three years ago. Furthermore, it's down 33% in about a quarter. That's not much fun for holders.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Novonix

Because Novonix made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.

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In the last twelve months, Novonix increased its revenue by 7.8%. While that may seem decent it isn't great considering the company is still making a loss. Nonetheless, it's fair to say the 75% share price implosion is unexpected.. We'd venture this growth was too low to give holders confidence that profitability is on the horizon. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Take a more thorough look at Novonix's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Novonix had a tough year, with a total loss of 75%, against a market gain of about 4.7%. 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 6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Novonix better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Novonix (including 1 which shouldn't be ignored) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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