U.S. Markets closed

Volatility 101: Should HUYA (NYSE:HUYA) Shares Have Dropped 20%?

Simply Wall St

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

HUYA Inc. (NYSE:HUYA) shareholders should be happy to see the share price up 20% in the last month. But that doesn't change the reality of under-performance over the last twelve months. In fact the stock is down 20% in the last year, well below the market return.

Check out our latest analysis for HUYA

Because HUYA is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

HUYA grew its revenue by 107% over the last year. That's well above most other pre-profit companies. The share price drop of 20% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

NYSE:HUYA Income Statement, June 24th 2019

HUYA is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling HUYA stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

While HUYA shareholders are down 20% for the year, the market itself is up 6.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 3.0% 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. You could get a better understanding of HUYA's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.