It's understandable if you feel frustrated when a stock you own sees a lower share price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. TheLi Auto Inc.(NASDAQ:LI) share price is down 10% in the last year. However, that's better than the market's overall decline of 16%. Li Auto hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.
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.
Because Li Auto 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, Li Auto increased its revenue by 140%. That's well above most other pre-profit companies. Given that the broader market is down the 10% drop last year isn't too bad. Given the strong revenue growth, it may simply be that the stock is suffering from market conditions. For us, this sort of situation smells of opportunity - the share price is down but the revenue is up. Either way, we'd say the mismatch between the revenue growth and the share price justifies a closer look.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
earnings-and-revenue-growth
Li Auto is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Li Auto stock, you should check out thisfreereport showing analyst consensus estimates for future profits.$Li Auto(LI)$
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