The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by iQIYI, Inc. (NASDAQ:IQ) shareholders over the last year, as the share price declined 18%. That's well bellow the market return of -11%. Because iQIYI hasn't been listed for many years, the market is still learning about how the business performs. The last month has also been disappointing, with the stock slipping a further 23%. We do note, however, that the broader market is down 22% in that period, and this may have weighed on the share price.
Given that iQIYI 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
iQIYI grew its revenue by 16% over the last year. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 18%. This implies the market was expecting better growth. However, that's in the past now, and it's the future that matters most.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
iQIYI is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think iQIYI will earn in the future (free analyst consensus estimates)
A Different Perspective
iQIYI shareholders are down 18% for the year, even worse than the market loss of 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 14% 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. It's always interesting to track share price performance over the longer term. But to understand iQIYI better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for iQIYI 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.