This month, we saw the Splitit Payments Ltd (ASX:SPT) up an impressive 47%. But that's small comfort given the dismal price performance over the last year. Like a receding glacier in a warming world, the share price has melted 56% in that period. The share price recovery is not so impressive when you consider the fall. Arguably, the fall was overdone.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Given that Splitit Payments didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong 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 year Splitit Payments saw its revenue grow by 56%. That's a strong result which is better than most other loss making companies. Meanwhile, the share price slid 56%. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Splitit Payments' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren't great for Splitit Payments shares, which performed worse than the market, costing holders 56%. The market shed around 3.0%, no doubt weighing on the stock price. The three-year loss of 13% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Splitit Payments (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
But note: Splitit Payments may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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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