Even though Zip Co (ASX:ZIP) has lost AU$154m market cap in last 7 days, shareholders are still up 130% over 1 year

It might be of some concern to shareholders to see the Zip Co Limited (ASX:ZIP) share price down 20% in the last month. On the other hand, over the last twelve months the stock has delivered rather impressive returns. During that period, the share price soared a full 130%. So it is important to view the recent reduction in price through that lense. More important, going forward, is how the business itself is going.

While the stock has fallen 12% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Zip Co

Given that Zip Co didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Zip Co grew its revenue by 24% last year. We respect that sort of growth, no doubt. The revenue growth is decent but the share price had an even better year, gaining 130%. Given that the business has made good progress on the top line, it would be worth taking a look at its path to profitability. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Zip Co's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Zip Co has rewarded shareholders with a total shareholder return of 130% in the last twelve months. Notably the five-year annualised TSR loss of 10% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Zip Co that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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