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Shareholders in Virgin Galactic Holdings (NYSE:SPCE) have lost 38%, as stock drops 3.0% this past week

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  • SPCE

Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Virgin Galactic Holdings, Inc. (NYSE:SPCE) share price is down 38% in the last year. That's disappointing when you consider the market returned 23%. Because Virgin Galactic Holdings hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

After losing 3.0% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Virgin Galactic Holdings

Virgin Galactic Holdings 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year Virgin Galactic Holdings saw its revenue grow by 311%. That's a strong result which is better than most other loss making companies. The share price drop of 38% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Virgin Galactic Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Given that the market gained 23% in the last year, Virgin Galactic Holdings shareholders might be miffed that they lost 38%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 33% 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 Virgin Galactic Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Virgin Galactic Holdings you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.