Even the best stock pickers will make plenty of bad investments. And unfortunately for Snowflake Inc. (NYSE:SNOW) shareholders, the stock is a lot lower today than it was a year ago. The share price has slid 60% in that time. We wouldn't rush to judgement on Snowflake because we don't have a long term history to look at. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.
With the stock having lost 4.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Snowflake 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Snowflake increased its revenue by 92%. That's a strong result which is better than most other loss making companies. Meanwhile, the share price slid 60%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Snowflake
A Different Perspective
Snowflake shareholders are down 60% for the year, even worse than the market loss of 18%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 25% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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 Snowflake that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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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.
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