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We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held AudioEye, Inc. (NASDAQ:AEYE) for half a decade as the share price tanked 83%. And we doubt long term believers are the only worried holders, since the stock price has declined 64% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 58% in the last 90 days.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for AudioEye
Given that AudioEye 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 expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, AudioEye grew its revenue at 55% 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 has averaged a fall of 30% each year, in the same time period. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling AudioEye stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
AudioEye shareholders are down 64% for the year, but the market itself is up 9.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 30% over the last half decade. We realise that Buffett 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 businesses. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.