Further weakness as Lion Electric (TSE:LEV) drops 13% this week, taking one-year losses to 60%

The Lion Electric Company (TSE:LEV) shareholders should be happy to see the share price up 20% in the last month. But that's small comfort given the dismal price performance over the last year. Specifically, the stock price slipped by 60% in that time. Some might say the recent bounce is to be expected after such a bad drop. Of course, it could be that the fall was overdone.

With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Lion Electric

SWOT Analysis for Lion Electric

While Lion Electric made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last twelve months, Lion Electric increased its revenue by 132%. That's well above most other pre-profit companies. In contrast the share price is down 60% 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.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Lion Electric stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Given that the market gained 2.5% in the last year, Lion Electric shareholders might be miffed that they lost 60%. 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 12% 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. 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 2 warning signs for Lion Electric (1 makes us a bit uncomfortable) that you should be aware of.

Lion Electric is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.