Yahoo Finance Piedmont Lithium (ASX:PLL) investors are sitting on a loss of 84% if they invested three years ago
As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So consider, for a moment, the misfortune of Piedmont Lithium Inc. (ASX:PLL) investors who have held the stock for three years as it declined a whopping 84%. That'd be enough to cause even the strongest minds some disquiet. The more recent news is of little comfort, with the share price down 81% in a year. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Piedmont Lithium
Piedmont Lithium isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Piedmont Lithium grew revenue at 134% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 23% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Investors in Piedmont Lithium had a tough year, with a total loss of 81%, against a market gain of about 7.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 0.8% 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. For instance, we've identified 1 warning sign for Piedmont Lithium that you should be aware of.
We will like Piedmont Lithium better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
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.
