Despegar.com (NYSE:DESP) shareholders are still up 92% over 1 year despite pulling back 7.4% in the past week

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Despegar.com, Corp. (NYSE:DESP) share price is up 92% in the last 1 year, clearly besting the market return of around 21% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 1.5% lower than it was three years ago.

In light of the stock dropping 7.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

See our latest analysis for Despegar.com

While Despegar.com made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over the last twelve months, Despegar.com's revenue grew by 23%. We respect that sort of growth, no doubt. While the share price performed well, gaining 92% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But it's crucial to check profitability and cash flow before forming a view on the future.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Despegar.com has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's good to see that Despegar.com has rewarded shareholders with a total shareholder return of 92% in the last twelve months. Notably the five-year annualised TSR loss of 0.3% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

We will like Despegar.com better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com