The past year for ATRenew (NYSE:RERE) investors has not been profitable
ATRenew Inc. (NYSE:RERE) shareholders should be happy to see the share price up 13% in the last month. But that doesn't change the fact that the returns over the last year have been stomach churning. To wit, the stock has dropped 83% over the last year. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for ATRenew
ATRenew 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, ATRenew increased its revenue by 49%. That's well above most other pre-profit companies. So the hefty 83% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at ATRenew's financial health with this free report on its balance sheet.
A Different Perspective
ATRenew shareholders are down 83% for the year, even worse than the market loss of 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 15% 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. Case in point: We've spotted 1 warning sign for ATRenew you should be aware of.
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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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.
