Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Backblaze, Inc. (NASDAQ:BLZE) shareholders over the last year, as the share price declined 31%. That's well below the market decline of 1.0%. Because Backblaze hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 24% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
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.
Backblaze isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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, Backblaze increased its revenue by 24%. That's definitely a respectable growth rate. Unfortunately that wasn't good enough to stop the share price dropping 31%. You might even wonder if the share price was previously over-hyped. However, that's in the past now, and it's the future that matters most.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Backblaze's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 1.0% in the last year, Backblaze shareholders might be miffed that they lost 31%. 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 24% 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. It's always interesting to track share price performance over the longer term. But to understand Backblaze better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Backblaze you should be aware of, and 1 of them is a bit concerning.
But note: Backblaze may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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