Did You Manage To Avoid Exela Technologies's (NASDAQ:XELA) Devastating 93% Share Price Drop?

Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So we hope that those who held Exela Technologies, Inc. (NASDAQ:XELA) during the last year don't lose the lesson, in addition to the 93% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on Exela Technologies because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 69% in the last three months. 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.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Exela Technologies

Because Exela Technologies is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In just one year Exela Technologies saw its revenue fall by 0.4%. That's not what investors generally want to see. The market obviously agrees, since the share price tanked 93%. Holders should not lose the lesson: loss making companies should grow revenue. But markets do over-react, so there opportunity for investors who are willing to take the time to dig deeper and understand the business.

The image below shows how earnings and revenue have tracked over time.

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Exela Technologies in this interactive graph of future profit estimates.

A Different Perspective

Given that the market gained 16% in the last year, Exela Technologies shareholders might be miffed that they lost 93%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 69%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.