StoneCo (NASDAQ:STNE shareholders incur further losses as stock declines 18% this week, taking one-year losses to 88%

By
Simply Wall St
Published
February 23, 2022
NasdaqGS:STNE
Source: Shutterstock

It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. It must have been painful to be a StoneCo Ltd. (NASDAQ:STNE) shareholder over the last year, since the stock price plummeted 88% in that time. A loss like this is a stark reminder that portfolio diversification is important. To make matters worse, the returns over three years have also been really disappointing (the share price is 64% lower than three years ago). Furthermore, it's down 37% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

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

View our latest analysis for StoneCo

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

StoneCo fell to a loss making position during the year. While this may prove temporary, we'd consider it a negative, so it doesn't surprise us that the stock price is down. We hope for shareholders' sake that the company becomes profitable again soon.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:STNE Earnings Per Share Growth February 23rd 2022

Dive deeper into StoneCo's key metrics by checking this interactive graph of StoneCo's earnings, revenue and cash flow.

A Different Perspective

The last twelve months weren't great for StoneCo shares, which cost holders 88%, while the market was up about 2.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 18% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand StoneCo better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with StoneCo .

Of course StoneCo may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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