Babcock & Wilcox Enterprises (NYSE:BW investor three-year losses grow to 76% as the stock sheds US$39m this past week

It is doubtless a positive to see that the Babcock & Wilcox Enterprises, Inc. (NYSE:BW) share price has gained some 75% in the last three months. But only the myopic could ignore the astounding decline over three years. In that time the share price has melted like a snowball in the desert, down 76%. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround.

After losing 21% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Babcock & Wilcox Enterprises

Because Babcock & Wilcox Enterprises 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. 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, Babcock & Wilcox Enterprises saw its revenue grow by 18% per year, compound. That's a pretty good rate of top-line growth. So it seems unlikely the 21% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Babcock & Wilcox Enterprises

A Different Perspective

Investors in Babcock & Wilcox Enterprises had a tough year, with a total loss of 71%, against a market gain of about 22%. 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 9% 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 Babcock & Wilcox Enterprises better, we need to consider many other factors. Even so, be aware that Babcock & Wilcox Enterprises is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

Babcock & Wilcox Enterprises is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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

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

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