Snap (NYSE:SNAP investor three-year losses grow to 76% as the stock sheds US$1.3b this past week

While it may not be enough for some shareholders, we think it is good to see the Snap Inc. (NYSE:SNAP) share price up 11% in a single quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. The share price has sunk like a leaky ship, down 76% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.

If the past week is anything to go by, investor sentiment for Snap isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Snap

Because Snap 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over three years, Snap grew revenue at 7.0% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 21% per year does seem a bit harsh! We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Snap in this interactive graph of future profit estimates.

A Different Perspective

Snap shareholders are down 32% for the year, but the market itself is up 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Snap better, we need to consider many other factors. Take risks, for example - Snap has 1 warning sign we think you should be aware of.

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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.