While it may not be enough for some shareholders, we think it is good to see the Pinterest, Inc. (NYSE:PINS) share price up 28% in a single quarter. But that doesn't change the reality of under-performance over the last twelve months. After all, the share price is down 25% in the last year, significantly under-performing the market.
Because Pinterest made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Pinterest grew its revenue by 47% over the last year. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 25% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Pinterest is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Pinterest will earn in the future (free analyst consensus estimates)
A Different Perspective
While Pinterest shareholders are down 25% for the year, the market itself is up 14%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 28% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). It's always interesting to track share price performance over the longer term. But to understand Pinterest better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Pinterest you should know about.
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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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. 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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