Shareholders in NextNav (NASDAQ:NN) have lost 50%, as stock drops 14% this past week

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by NextNav Inc. (NASDAQ:NN) shareholders over the last year, as the share price declined 50%. That contrasts poorly with the market decline of 9.0%. NextNav hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 35% 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.

After losing 14% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for NextNav

Given that NextNav 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 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.

NextNav grew its revenue by 155% over the last year. That's well above most other pre-profit companies. The share price drop of 50% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

NextNav shareholders are down 50% for the year, even worse than the market loss of 9.0%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 35% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand NextNav better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for NextNav you should be aware of.

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 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.