Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Fitbit, Inc. (NYSE:FIT), who have seen the share price tank a massive 79% over a three year period. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 40% in the last year. Shareholders have had an even rougher run lately, with the share price down 35% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Given that Fitbit 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years Fitbit saw its revenue shrink by 15% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 41% per year. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Fitbit is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Fitbit will earn in the future (free analyst consensus estimates)
A Different Perspective
Over the last year, Fitbit shareholders took a loss of 40%. In contrast the market gained about 3.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 41% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
We will like Fitbit 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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.