As every investor would know, you don't hit a homerun every time you swing. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame Yalla Group Limited (NYSE:YALA) shareholders if they were still in shock after the stock dropped like a lead balloon, down 80% in just one year. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on Yalla Group 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 34% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year Yalla Group saw its earnings per share increase strongly. While the business is unlikely to sustain such a high growth rate for long, it's great to see. As you can imagine, the share price action therefore perturbs us. Some different data might shed some more light on the situation.
Yalla Group managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Yalla Group has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Yalla Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Yalla Group shareholders are down 80% for the year, even worse than the market loss of 11%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 34%, 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. Take risks, for example - Yalla Group has 2 warning signs we think you should be aware of.
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.