If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term nLIGHT, Inc. (NASDAQ:LASR) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 61% share price collapse, in that time. The last week also saw the share price slip down another 12%.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

nLIGHT wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years nLIGHT saw its revenue shrink by 11% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 17% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on nLIGHT's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in nLIGHT had a tough year, with a total loss of 1.7%, against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 6% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Even so, be aware that nLIGHT is showing 2 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.