Further weakness as Sunnova Energy International (NYSE:NOVA) drops 12% this week, taking three-year losses to 84%

It's not possible to invest over long periods without making some bad investments. 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 Sunnova Energy International Inc. (NYSE:NOVA), who have seen the share price tank a massive 84% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And over the last year the share price fell 74%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 51% in the last 90 days. 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.

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

Check out our latest analysis for Sunnova Energy International

Given that Sunnova Energy International 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. Shareholders of unprofitable companies usually desire strong 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.

Over three years, Sunnova Energy International grew revenue at 40% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 22% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Sunnova Energy International in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 26% in the last year, Sunnova Energy International shareholders lost 74%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should learn about the 4 warning signs we've spotted with Sunnova Energy International (including 3 which make us uncomfortable) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.