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Even the best investor on earth makes unsuccessful investments. But serious investors should think long and hard about avoiding extreme losses. So we hope that those who held Snap Inc. (NYSE:SNAP) during the last year don't lose the lesson, in addition to the 77% hit to the value of their shares. That'd be enough to make even the strongest stomachs churn. On the other hand, the stock is actually up 21% over three years. Furthermore, it's down 64% in about a quarter. That's not much fun for holders.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Snap 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 expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Snap grew its revenue by 57% over the last year. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 77% over twelve months. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market lost about 14% in the twelve months, Snap shareholders did even worse, losing 77%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Snap better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Snap .
We will like Snap better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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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.