The nature of investing is that you win some, and you lose some. Anyone who held Veoneer, Inc. (NYSE:VNE) over the last year knows what a loser feels like. To wit the share price is down 55% in that time. Veoneer hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 16% in the last three months.
Because Veoneer 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Veoneer’s revenue didn’t grow at all in the last year. In fact, it fell 13%. That’s not what investors generally want to see. In the absence of profits, it’s not unreasonable that the share price fell 55%. Fingers crossed this is the low ebb for the stock. We don’t generally like to own companies with falling revenues and no profits, so we’re pretty cautious of this one, at the moment.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Veoneer is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Veoneer in this interactive graph of future profit estimates.
A Different Perspective
While Veoneer shareholders are down 55% for the year, the market itself is up 27%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 16% 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. 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. Be aware that Veoneer is showing 3 warning signs in our investment analysis , you should know about…
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 US exchanges.
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