As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Nevro Corp. (NYSE:NVRO) investors who have held the stock for three years as it declined a whopping 89%. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 47%, so we doubt many shareholders are delighted. The last week also saw the share price slip down another 10%. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Since Nevro has shed US$78m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Nevro

Given that Nevro didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 three years, Nevro saw its revenue grow by 4.6% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 24%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Nevro shareholders are down 47% for the year, but the market itself is up 22%. 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 8% 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 Nevro better, we need to consider many other factors. For instance, we've identified 2 warning signs for Nevro that you should be aware of.

Nevro is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.