Shareholders in PagerDuty (NYSE:PD) have lost 61%, as stock drops 7.6% this past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term PagerDuty, Inc. (NYSE:PD) shareholders. So they might be feeling emotional about the 61% share price collapse, in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 24% lower in that time. And the share price decline continued over the last week, dropping some 7.6%.

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

View our latest analysis for PagerDuty

Because PagerDuty 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, PagerDuty saw its revenue grow by 22% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 17% over that time, a bad result. This could mean hype has come out of the stock because the losses are concerning investors. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

PagerDuty is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for PagerDuty in this interactive graph of future profit estimates.

A Different Perspective

PagerDuty shareholders are down 24% for the year, but the market itself is up 23%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 example, we've discovered 2 warning signs for PagerDuty that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued 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 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.