Shareholders in 8x8 (NASDAQ:EGHT) have lost 88%, as stock drops 12% this past week

We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held 8x8, Inc. (NASDAQ:EGHT) for half a decade as the share price tanked 88%. And it's not just long term holders hurting, because the stock is down 28% in the last year. Even worse, it's down 13% in about a month, which isn't fun at all. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

If the past week is anything to go by, investor sentiment for 8x8 isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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8x8 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

Over five years, 8x8 grew its revenue at 9.4% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 13% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at 8x8's financial health with this free report on its balance sheet.

A Different Perspective

8x8 shareholders are down 28% for the year, but the market itself is up 22%. 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, longer term shareholders are suffering worse, given the loss of 13% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand 8x8 better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for 8x8 you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.