If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Ambarella, Inc. (NASDAQ:AMBA) have had an unfortunate run in the last three years. Unfortunately, they have held through a 52% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 27% in the last year.
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.
Ambarella isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 three years, Ambarella saw its revenue grow by 1.7% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 15% during the period. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Ambarella is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Ambarella in this interactive graph of future profit estimates.
A Different Perspective
Ambarella shareholders are down 27% for the year, but the market itself is up 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. 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 Ambarella better, we need to consider many other factors. Take risks, for example - Ambarella has 3 warning signs we think you should be aware of.
We will like Ambarella better if we see some big insider buys. While we wait, check out this free list of growing companies 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 American 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.