Sunrun (NASDAQ:RUN) dips 9.9% this week as increasing losses might not be inspiring confidence among its investors

Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Sunrun Inc. (NASDAQ:RUN); the share price is down a whopping 80% in the last three years. That'd be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 55% in the last year. Furthermore, it's down 37% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Since Sunrun has shed US$147m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Sunrun wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Sunrun saw its revenue grow by 4.2% 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 22% 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on Sunrun

A Different Perspective

Sunrun shareholders are down 55% for the year, but the market itself is up 7.3%. 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 6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Sunrun better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Sunrun (including 1 which is concerning) .

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 American 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.