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Should Despegar.com (NYSE:DESP) Be Disappointed With Their 98% Profit?

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The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Despegar.com, Corp. (NYSE:DESP) share price is up 98% in the last year, clearly besting the market return of around 57% (not including dividends). That's a solid performance by our standards! Zooming out, the stock is actually down 54% in the last three years.

See our latest analysis for Despegar.com

Given that Despegar.com 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Despegar.com actually shrunk its revenue over the last year, with a reduction of 75%. Despite the lack of revenue growth, the stock has returned a solid 98% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Take a more thorough look at Despegar.com's financial health with this free report on its balance sheet.

A Different Perspective

Pleasingly, Despegar.com's total shareholder return last year was 98%. What is absolutely clear is that is far preferable to the dismal 15% average annual loss suffered over the last three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. 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. Case in point: We've spotted 2 warning signs for Despegar.com you should be aware of.

But note: Despegar.com may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.