The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Akerna Corp. (NASDAQ:KERN) have tasted that bitter downside in the last year, as the share price dropped 48%. That contrasts poorly with the market return of 33%. Akerna hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
Since Akerna has shed US$7.5m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
Because Akerna 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 expect strong 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.
In the last twelve months, Akerna increased its revenue by 47%. That’s a strong result which is better than most other loss making companies. The share price drop of 48% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there’s value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
NasdaqCM:KERN Earnings and Revenue Growth August 18th 2021
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While Akerna shareholders are down 48% for the year, 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. With the stock down 7.5% 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. For example, we’ve discovered 5 warning signs for Akerna (2 shouldn’t be ignored!) that you should be aware of before investing here.
We will like Akerna 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 US exchanges.
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.
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