Investors are selling off LifeStance Health Group (NASDAQ:LFST), lack of profits no doubt contribute to shareholders one-year loss
As every investor would know, you don't hit a homerun every time you swing. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a LifeStance Health Group, Inc. (NASDAQ:LFST) shareholder over the last year, since the stock price plummeted 80% in that time. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on LifeStance Health Group because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 47% in the last 90 days. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
If the past week is anything to go by, investor sentiment for LifeStance Health Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for LifeStance Health Group
Given that LifeStance Health Group 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, LifeStance Health Group increased its revenue by 63%. That's well above most other pre-profit companies. So the hefty 80% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We doubt LifeStance Health Group shareholders are happy with the loss of 80% over twelve months. That falls short of the market, which lost 20%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 47% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Take risks, for example - LifeStance Health Group has 2 warning signs we think you should be aware of.
We will like LifeStance Health Group 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
