Ontrak (NASDAQ:OTRK shareholders incur further losses as stock declines 15% this week, taking one-year losses to 89%

By
Simply Wall St
Published
December 01, 2021
NasdaqGM:OTRK
Source: Shutterstock

Even the best investor on earth makes unsuccessful investments. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Ontrak, Inc. (NASDAQ:OTRK); the share price is down a whopping 89% in the last twelve months. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. To make matters worse, the returns over three years have also been really disappointing (the share price is 46% lower than three years ago). Furthermore, it's down 53% in about a quarter. That's not much fun for holders. 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. 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 Ontrak isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Ontrak

Ontrak 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last twelve months, Ontrak increased its revenue by 58%. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 89% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.

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
NasdaqGM:OTRK Earnings and Revenue Growth December 2nd 2021

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market gained around 20% in the last year, Ontrak shareholders lost 89%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. 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 Ontrak better, we need to consider many other factors. Take risks, for example - Ontrak has 4 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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