2U, Inc. (NASDAQ:TWOU) shareholders should be happy to see the share price up 18% in the last month. But that isn't much consolation for the painful drop we've seen in the last year. During that time the share price has plummeted like a stone, down 75%. So it's not that amazing to see a bit of a bounce. Only time will tell if the company can sustain the turnaround.
2U isn't a profitable company, so 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.
In the last year 2U saw its revenue grow by 38%. We think that is pretty nice growth. Unfortunately, the market wanted something better, given it sent the share price 75% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. We'd posit that the future looks challenging, given the disconnect between revenue growth and the share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think 2U will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 4.4% in the last year, 2U shareholders lost 75%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5.7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of 2U by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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