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As every investor would know, you don't hit a homerun every time you swing. But it's not unreasonable to try to avoid truly shocking capital losses. It must have been painful to be a Wheels Up Experience Inc. (NYSE:UP) shareholder over the last year, since the stock price plummeted 76% in that time. A loss like this is a stark reminder that portfolio diversification is important. Wheels Up Experience hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 30% in the last three months. Of course, this share price action may well have been influenced by the 15% decline in the broader market, throughout the period.
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.
Because Wheels Up Experience made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Wheels Up Experience grew its revenue by 57% over the last year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 76% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Wheels Up Experience in this interactive graph of future profit estimates.
A Different Perspective
Wheels Up Experience shareholders are down 76% for the year, even worse than the market loss of 18%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 30% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Wheels Up Experience better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Wheels Up Experience you should know about.
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.