NOVONIX (ASX:NVX) shareholders are up 20% this past week, but still in the red over the last five years

NOVONIX Limited (ASX:NVX) shareholders should be happy to see the share price up 20% in the last week. But that is little comfort to those holding over the last half decade, sitting on a big loss. Indeed, the share price is down 70% in the period. So we're not so sure if the recent bounce should be celebrated. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

On a more encouraging note the company has added AU$71m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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Because NOVONIX 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, NOVONIX saw its revenue increase by 15% per year. That's a fairly respectable growth rate. The share price, meanwhile, has fallen 11% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. That could lead to an opportunity if the company is going to become profitable sooner rather than later.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market gained around 9.6% in the last year, NOVONIX shareholders lost 35%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand NOVONIX better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for NOVONIX (of which 2 are potentially serious!) you should know about.

We will like NOVONIX 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.