Loss-making Fastly (NYSE:FSLY) sheds a further US$287m, taking total shareholder losses to 63% over 1 year
Investing in stocks comes with the risk that the share price will fall. And there's no doubt that Fastly, Inc. (NYSE:FSLY) stock has had a really bad year. To wit the share price is down 63% in that time. We wouldn't rush to judgement on Fastly because we don't have a long term history to look at. Unfortunately the share price momentum is still quite negative, with prices down 24% in thirty days.
Since Fastly has shed US$287m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Fastly
Fastly isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Fastly increased its revenue by 27%. That's definitely a respectable growth rate. Meanwhile, the share price tanked 63%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Fastly is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
While Fastly shareholders are down 63% for the year, the market itself is up 15%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 18% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 5 warning signs for Fastly (1 doesn't sit too well with us) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
