Taking the occasional loss comes part and parcel with investing on the stock market. And unfortunately for Box, Inc. (NYSE:BOX) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 54% in that time. Even if you look out three years, the returns are still disappointing, with the share price down43% in that time. Shareholders have had an even rougher run lately, with the share price down 47% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 25% in the same timeframe.
Given that Box 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. 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.
In the last year Box saw its revenue grow by 14%. That's definitely a respectable growth rate. Meanwhile, the share price tanked 54%, suggesting the market had much higher expectations. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Box is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Box in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that Box shareholders are down 54% for the year. Unfortunately, that's worse than the broader market decline of 15%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Box you should know about.
Of course Box 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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