What happened

Vuzix (VUZI -3.11%) took a tumble on Tuesday after the company reported disappointing earnings results. Shares of the augmented reality glasses company were down as much as 18.4% on the news. As of 12:14 p.m. EDT, the stock is down 13.3% for the day.

So what

Vuzix announced its second-quarter 2021 earnings after the close on Monday, Aug. 9. Earnings per share came in at a loss of $0.14, which was worse than the $0.10 loss analysts were expecting. This earnings miss is likely a big reason Vuzix stock was down on Tuesday.

A person looking at a laptop with a hand over their face.

Image source: Getty Images.

The rest of the report did not look great, either. Revenue was down 4% year over year to $2.9 million in the quarter, while gross margin decreased to 20%. Sales of Vuzix's smart glasses actually rose 21% in the quarter, but it lost almost all of its engineering services revenue, which caused revenue growth to turn negative in the period.

Now what

At a market cap of around $733 million, investors are betting on huge growth from Vuzix over the next few years. The stock trades at a trailing price-to-sales ratio (P/S) above 50, making it one of the most expensive stocks on the market. If its revenue continues to stagnate with decreasing gross margin, shareholders risk losing all of their investment in this stock, and unless you think a turnaround is in store, it is probably smart to stay far away from this company at the moment.