Further weakness as Super League Gaming (NASDAQ:SLGG) drops 16% this week, taking one-year losses to 46%

By
Simply Wall St
Published
January 24, 2022
NasdaqCM:SLGG
Source: Shutterstock

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Super League Gaming, Inc. (NASDAQ:SLGG) share price is down 46% in the last year. That contrasts poorly with the market return of 5.6%. Super League Gaming may have better days ahead, of course; we've only looked at a one year period. Furthermore, it's down 40% in about a quarter. That's not much fun for holders.

With the stock having lost 16% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Super League Gaming

Super League Gaming 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last year Super League Gaming saw its revenue grow by 304%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 46% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NasdaqCM:SLGG Earnings and Revenue Growth January 24th 2022

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Super League Gaming will earn in the future (free profit forecasts).

A Different Perspective

Given that the market gained 5.6% in the last year, Super League Gaming shareholders might be miffed that they lost 46%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 40% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Super League Gaming is showing 6 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

Super League Gaming is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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