As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So spare a thought for the long term shareholders of NIO Inc. (NYSE:NIO); the share price is down a whopping 71% in the last three years. That would certainly shake our confidence in the decision to own the stock. Furthermore, it’s down 36% in about a quarter. That’s not much fun for holders.
Given the past week has been tough on shareholders, let’s investigate the fundamentals and see what we can learn.
See our latest analysis for NIO
Because NIO made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, NIO grew revenue at 43% per year. That is faster than most pre-profit companies. So on the face of it we’re really surprised to see the share price down 20% a year in the same time period. You’d want to take a close look at the balance sheet, as well as the losses. 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).
NIO is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling NIO stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
While the broader market gained around 13% in the last year, NIO shareholders lost 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand NIO better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 3 warning signs for NIO you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.