Investors are selling off Nevro (NYSE:NVRO), lack of profits no doubt contribute to shareholders one-year loss

The nature of investing is that you win some, and you lose some. Anyone who held Nevro Corp. (NYSE:NVRO) over the last year knows what a loser feels like. In that relatively short period, the share price has plunged 68%. Notably, shareholders had a tough run over the longer term, too, with a drop of 55% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 26% in thirty days. However, we note the price may have been impacted by the broader market, which is down 11% in the same time period.

If the past week is anything to go by, investor sentiment for Nevro isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Nevro

Nevro 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Nevro's revenue didn't grow at all in the last year. In fact, it fell 5.2%. That looks pretty grim, at a glance. In the absence of profits, it's not unreasonable that the share price fell 68%. Having said that, if growth is coming in the future, the stock may have better days ahead. We have a natural aversion to companies that are losing money and shrinking revenue. But perhaps that is being too careful.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Nevro will earn in the future (free profit forecasts).

A Different Perspective

While the broader market lost about 22% in the twelve months, Nevro shareholders did even worse, losing 68%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Nevro better, we need to consider many other factors. Take risks, for example - Nevro has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here