Every investor on earth makes bad calls sometimes. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Aurora Mobile Limited (NASDAQ:JG) investors who have held the stock for three years as it declined a whopping 80%. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 60% in the last year. The falls have accelerated recently, with the share price down 47% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
If the past week is anything to go by, investor sentiment for Aurora Mobile isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Aurora Mobile 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years, Aurora Mobile's revenue dropped 24% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 22%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
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 Aurora Mobile's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren't great for Aurora Mobile shares, which cost holders 60%, while the market was up about 20%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 22% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Aurora Mobile better, we need to consider many other factors. For example, we've discovered 3 warning signs for Aurora Mobile (1 is concerning!) that you should be aware of before investing here.
Of course Aurora Mobile 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 US 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.