Further weakness as Babcock & Wilcox Enterprises (NYSE:BW) drops 15% this week, taking three-year losses to 82%

While it may not be enough for some shareholders, we think it is good to see the Babcock & Wilcox Enterprises, Inc. (NYSE:BW) share price up 16% in a single quarter. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 82%. So we're relieved for long term holders to see a bit of uplift. But the more important question is whether the underlying business can justify a higher price still. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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

View our latest analysis for Babcock & Wilcox Enterprises

Babcock & Wilcox Enterprises 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Babcock & Wilcox Enterprises grew revenue at 11% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 22% share price drop (each year) is entirely about the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

Babcock & Wilcox Enterprises provided a TSR of 9.0% over the last twelve months. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Babcock & Wilcox Enterprises (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.