The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Twilio Inc. (NYSE:TWLO) shareholder over the last year, since the stock price plummeted 84% in that time. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. To make matters worse, the returns over three years have also been really disappointing (the share price is 52% lower than three years ago). Even worse, it's down 38% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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.
Because Twilio 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Twilio increased its revenue by 43%. That's definitely a respectable growth rate. However, it seems like the market wanted more, since the share price is down 84%. One fear might be that the company might be losing too much money and will need to raise more. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Twilio is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Twilio stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
We regret to report that Twilio shareholders are down 84% for the year. Unfortunately, that's worse than the broader market decline of 19%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should be aware of the 4 warning signs we've spotted with Twilio .
We will like Twilio better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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