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It's nice to see the Stitch Fix, Inc. (NASDAQ:SFIX) share price up 14% in a week. But that doesn't change the fact that the returns over the last year have been stomach churning. Specifically, the stock price nose-dived 73% in that time. It's not uncommon to see a bounce after a drop like that. The real question is whether the company can turn around its fortunes.
While the last year has been tough for Stitch Fix shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
Stitch Fix isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Stitch Fix increased its revenue by 22%. That's definitely a respectable growth rate. However, it seems like the market wanted more, since the share price is down 73%. It could be that the losses are too much for investors to handle without losing their nerve. We'd posit that the future looks challenging, given the disconnect between revenue growth and the share price.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Stitch Fix is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. 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
The last twelve months weren't great for Stitch Fix shares, which performed worse than the market, costing holders 73%. The market shed around 2.8%, no doubt weighing on the stock price. The three-year loss of 17% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Stitch Fix better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Stitch Fix .
We will like Stitch Fix 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.
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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.