Further weakness as Ballard Power Systems (TSE:BLDP) drops 7.8% this week, taking three-year losses to 83%

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Ballard Power Systems Inc. (TSE:BLDP), who have seen the share price tank a massive 83% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And over the last year the share price fell 40%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 15% in thirty days. 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 Ballard Power Systems isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Ballard Power Systems

Ballard Power Systems isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, Ballard Power Systems' revenue dropped 5.2% per year. That's not what investors generally want to see. The share price fall of 22% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.

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

Ballard Power Systems is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in Ballard Power Systems had a tough year, with a total loss of 40%, against a market gain of about 12%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% 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 Ballard Power Systems better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Ballard Power Systems , and understanding them should be part of your investment process.

But note: Ballard Power Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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