It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. It must have been painful to be a Vasta Platform Limited (NASDAQ:VSTA) shareholder over the last year, since the stock price plummeted 75% in that time. That'd be a striking reminder about the importance of diversification. Vasta Platform hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 46% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
After losing 15% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Vasta Platform isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In just one year Vasta Platform saw its revenue fall by 12%. That's not what investors generally want to see. The market obviously agrees, since the share price tanked 75%. Holders should not lose the lesson: loss making companies should grow revenue. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While Vasta Platform shareholders are down 75% for the year, the market itself is up 31%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 46% 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 Vasta Platform better, we need to consider many other factors. For instance, we've identified 1 warning sign for Vasta Platform that you should be aware of.
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.
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.
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