Cerence (NASDAQ:CRNC investor three-year losses grow to 76% as the stock sheds US$46m this past week

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Cerence Inc. (NASDAQ:CRNC), who have seen the share price tank a massive 76% over a three year period. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 46%, so we doubt many shareholders are delighted. More recently, the share price has dropped a further 28% in a month.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Given that Cerence didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Cerence saw its revenue shrink by 6.7% per year. That's not what investors generally want to see. The share price fall of 21% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. Don't let a share price decline ruin your calm. You make better decisions when you're calm.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Cerence's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Cerence shareholders are down 46% for the year, but the market itself is up 9.5%. 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. 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. Take risks, for example - Cerence has 2 warning signs (and 1 which is potentially serious) we think you should know about.

Of course Cerence may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.