It’s easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Navitas Semiconductor Corporation (NASDAQ:NVTS) share price is down 30% in the last year. That falls noticeably short of the market decline of around 8.4%. Because Navitas Semiconductor hasn’t been listed for many years, the market is still learning about how the business performs. In the last ninety days we’ve seen the share price slide 31%.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Because Navitas Semiconductor 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Navitas Semiconductor saw its revenue grow by 100%. That’s a strong result which is better than most other loss making companies. The share price drop of 30% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. 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 below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Navitas Semiconductor’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Navitas Semiconductor shareholders are down 30% for the year, even worse than the market loss of 8.4%. There’s no doubt that’s a disappointment, but the stock may well have fared better in a stronger market. Notably, the loss over the last year isn’t as bad as the 31% drop in the last three months. This probably signals that the business has recently disappointed shareholders – it will take time to win them back. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Navitas Semiconductor (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Of course Navitas Semiconductor may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.