The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame Agora, Inc. (NASDAQ:API) shareholders if they were still in shock after the stock dropped like a lead balloon, down 89% in just one year. That'd be enough to make even the strongest stomachs churn. We wouldn't rush to judgement on Agora because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 57% in the last three months. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
With the stock having lost 17% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Agora wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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 Agora saw its revenue grow by 35%. We think that is pretty nice growth. Unfortunately, the market wanted something better, given it sent the share price 89% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Agora stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While Agora shareholders are down 89% for the year, the market itself is up 2.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 57%, suggesting an absence of enthusiasm from investors. 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. For instance, we've identified 3 warning signs for Agora that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.