SecureWorks Corp. (NASDAQ:SCWX) shareholders have seen the share price descend 11% over the month. But that doesn’t detract from the splendid returns of the last year. We’re very pleased to report the share price shot up 126% in that time. So it is important to view the recent reduction in price through that lense. Only time will tell if there is still too much optimism currently reflected in the share price.
Because SecureWorks is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last twelve months, SecureWorks’s revenue grew by 9.2%. That’s not a very high growth rate considering it doesn’t make profits. So we wouldn’t have expected the share price to rise by 126%. The business will need a lot more growth to justify that increase. We’re not so sure that revenue growth is driving the market optimism about the stock.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
SecureWorks is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
It’s nice to see that SecureWorks shareholders have gained 126% over the last year. The more recent returns haven’t been as impressive as the longer term returns, coming in at just 15%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course SecureWorks may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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