The Novonix share price has tumbled 25% so far in December. What's going wrong?

Novonix shares have been under pressure in December. What's going on?

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It hasn't been an all too merry December for the Novonix Ltd (ASX: NVX) share price this year. Shares in the battery materials and technology company have sunk around 25% in value since the beginning of the month.

In contrast, the Novonix share price rallied ~12.5% in December last year. Since then, the company's shares have gone on to be the best performing of the entire S&P/ASX 200 Index (ASX: XJO) in the last year — rising more than 750% in the past 12 months. However, it appears the heat has recently died off on this red hot stock.

Let's take a look at what might be hampering this electrifying company in December.

Valuations pulled into question on Novonix share price

After hitting an all-time high of $12.47 on 2 December 2021, the Novonix share price violently tumbled 27% the following day. Perhaps the most unsettling characteristic of this price decline was that it occurred without any announcement from the company.

The reversal in the battery testing and anode material developer followed an article in The Australian Financial Review a day earlier. The article highlighted the disparity between the market capitalisation and revenue of many 'green' investment plays.

In the case of Novonix, it held a valuation of around $6 billion on revenues of $5.3 million prior to its fall. This reflected a price-to-sales (P/S) ratio of ~1,132 times. For comparison, another ASX-listed company developing green technologies, Calix Ltd (ASX: CXL), currently trades on a P/S ratio of approximately 50 times.

As we have covered previously, the publication noted there seemed to be "dozens, or perhaps hundreds" of lithium or green-orientated companies that will be driven more by sentiment than financials over the next year.

Since the fall on 3 December, the Novonix share price has recovered around 10%. However, the company's shares are still a significant 39% away from their 52-week high.

Board members increase holdings

The latest news from Novonix, published to the ASX, involves two "change of director's interest" notices. According to the notices, executive director Robert Natter and non-executive chair Anthony Bellas exercised their performance rights to acquire more Novonix shares last week.

Furthermore, both Natter and Bellas acquired 200,000 Novonix shares following the exercising of their performance rights. At the current Novonix share price, that equates to $1.806 million worth of shares each.

Finally, the company's shares remain up 642% year-to-date. At the time of writing, Novonix is trading at $9.02 per share.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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