Stock Analysis

Investors in Zoom Video Communications (NASDAQ:ZM) have unfortunately lost 62% over the last year

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NasdaqGS:ZM
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Even the best stock pickers will make plenty of bad investments. And there's no doubt that Zoom Video Communications, Inc. (NASDAQ:ZM) stock has had a really bad year. The share price is down a hefty 62% in that time. Zoom Video Communications hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

See our latest analysis for Zoom Video Communications

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Even though the Zoom Video Communications share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.

Zoom Video Communications managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
NasdaqGS:ZM Earnings and Revenue Growth March 29th 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Zoom Video Communications stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While Zoom Video Communications shareholders are down 62% for the year, the market itself is up 9.0%. 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. The share price decline has continued throughout the most recent three months, down 36%, 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. It's always interesting to track share price performance over the longer term. But to understand Zoom Video Communications better, we need to consider many other factors. For instance, we've identified 2 warning signs for Zoom Video Communications (1 shouldn't be ignored) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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