Further weakness as Velo3D (NYSE:VLD) drops 21% this week, taking one-year losses to 73%

By
Simply Wall St
Published
May 13, 2022
NYSE:VLD
Source: Shutterstock

The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Velo3D, Inc. (NYSE:VLD) shareholder over the last year, since the stock price plummeted 73% in that time. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on Velo3D because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 62% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

With the stock having lost 21% 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 Velo3D

Velo3D 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Velo3D grew its revenue by 180% over the last year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 73% over twelve months. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, markets do over-react so share price drop may be too harsh.

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

earnings-and-revenue-growth
NYSE:VLD Earnings and Revenue Growth May 13th 2022

If you are thinking of buying or selling Velo3D stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We doubt Velo3D shareholders are happy with the loss of 73% over twelve months. That falls short of the market, which lost 9.4%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 62% 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. 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 2 warning signs with Velo3D , and understanding them should be part of your investment process.

We will like Velo3D better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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