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Ballard Power Systems Inc. (TSE:BLDP) shareholders should be happy to see the share price up 26% in the last month. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 85% in the last three years. So it's about time shareholders saw some gains. The thing to think about is whether the business has really turned around. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Ballard Power Systems
Because Ballard Power Systems made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, Ballard Power Systems' revenue dropped 2.7% per year. That's not what investors generally want to see. The share price fall of 23% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Ballard Power Systems is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market gained around 23% in the last year, Ballard Power Systems shareholders lost 52%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Ballard Power Systems that you should be aware of.