NOVONIX (ASX:NVX investor three-year losses grow to 88% as the stock sheds AU$41m this past week

As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of NOVONIX Limited (ASX:NVX), who have seen the share price tank a massive 88% over a three year period. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 39% lower in that time. On top of that, the share price is down 13% in the last week. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

If the past week is anything to go by, investor sentiment for NOVONIX isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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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 hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, NOVONIX saw its revenue grow by 7.9% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 24% per year does seem a bit harsh! We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

NOVONIX shareholders are down 39% for the year, but the market itself is up 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 5 warning signs we've spotted with NOVONIX (including 2 which are a bit concerning) .

Of course NOVONIX 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 Australian 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.