As every investor would know, you don't hit a homerun every time you swing. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Microvast Holdings, Inc. (NASDAQ:MVST); the share price is down a whopping 80% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. To make matters worse, the returns over three years have also been really disappointing (the share price is 72% lower than three years ago). Furthermore, it's down 62% in about a quarter. That's not much fun for holders.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Microvast Holdings 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Microvast Holdings grew its revenue by 50% over the last year. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 80% over twelve months. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. This free report showing analyst forecasts should help you form a view on Microvast Holdings
A Different Perspective
Microvast Holdings shareholders are down 80% for the year, falling short of the market return. Meanwhile, the broader market slid about 17%, likely weighing on the stock. The three-year loss of 20% 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. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with Microvast Holdings (including 1 which shouldn't be ignored) .
Microvast Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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.