This month, we saw the Nine Energy Service, Inc. (NYSE:NINE) up an impressive 46%. But that doesn't change the fact that the returns over the last year have been disappointing. Like a receding glacier in a warming world, the share price has melted 66% in that period. It's not that amazing to see a bounce after a drop like that. You could argue that the sell-off was too severe.
Nine Energy Service isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Nine Energy Service's revenue didn't grow at all in the last year. In fact, it fell 54%. If you think that's a particularly bad result, you're statistically on the money Arguably, the market has responded appropriately to this performance by sending the share price down 66% in the same time period. Buying shares in companies that lose money, shrink revenue, and see share price declines is unpopular with investors, but popular with speculators (apparently). So we'll be looking for strong improvements on the numbers before getting excited.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Given that the market gained 22% in the last year, Nine Energy Service shareholders might be miffed that they lost 66%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 8.6%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Nine Energy Service , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing 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 US exchanges.
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This article by Simply Wall St is general in nature. 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.
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