Even after rising 13% this past week, NOVONIX (ASX:NVX) shareholders are still down 70% over the past three years

NOVONIX Limited (ASX:NVX) shareholders should be happy to see the share price up 13% in the last week. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 70%. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still.

The recent uptick of 13% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for NOVONIX

Given that NOVONIX 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, NOVONIX grew revenue at 28% per year. That's well above most other pre-profit companies. So why has the share priced crashed 19% per year, in the same time? 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. Unless the balance sheet is strong, the company might have to raise capital.

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

earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling NOVONIX stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market gained around 13% in the last year, NOVONIX shareholders lost 28%. 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 3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that NOVONIX is showing 3 warning signs in our investment analysis , and 2 of those are significant...

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 Australian 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.

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