Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame Berkshire Grey, Inc. (NASDAQ:BGRY) shareholders if they were still in shock after the stock dropped like a lead balloon, down 76% in just one year. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on Berkshire Grey because we don't have a long term history to look at. Furthermore, it's down 25% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 11% in the same timeframe.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Berkshire Grey
Because Berkshire Grey 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Berkshire Grey grew its revenue by 318% over the last year. That's well above most other pre-profit companies. So the hefty 76% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Berkshire Grey
A Different Perspective
We doubt Berkshire Grey shareholders are happy with the loss of 76% over twelve months. That falls short of the market, which lost 9.0%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 25% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Berkshire Grey , and understanding them should be part of your investment process.