Taking the occasional loss comes part and parcel with investing on the stock market. And unfortunately for Similarweb Ltd. (NYSE:SMWB) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 60% in that time. We wouldn't rush to judgement on Similarweb because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 39% in the last 90 days. But this could be related to the weak market, which is down 16% in the same period.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Because Similarweb 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 expect to see good revenue growth. 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 twelve months, Similarweb increased its revenue by 49%. That's a strong result which is better than most other loss making companies. Meanwhile, the share price slid 60%. This could mean hype has come out of the stock because the bottom line is concerning investors. Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We doubt Similarweb shareholders are happy with the loss of 60% over twelve months. That falls short of the market, which lost 9.4%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 39%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Similarweb you should be aware of.
For those who like to find winning investments this free list of growing 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 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.