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ShiftPixy, Inc. (NASDAQ:PIXY) shareholders should be happy to see the share price up 27% in the last week. But that doesn’t change the fact that the returns over the last year have been stomach churning. During that time the share price has plummeted like a stone, down 82%. It’s not uncommon to see a bounce after a drop like that. The important thing is whether the company can turn it around, longer term.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
ShiftPixy isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year ShiftPixy saw its revenue grow by 88%. That’s a strong result which is better than most other loss making companies. So the hefty 82% share price crash makes us think the company has somehow offended market participants. 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.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
Take a more thorough look at ShiftPixy’s financial health with this free report on its balance sheet.
A Different Perspective
While ShiftPixy shareholders are down 82% for the year, the market itself is up 4.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 69% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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 firstname.lastname@example.org. 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.