As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Sunlands Technology Group (NYSE:STG) investors who have held the stock for three years as it declined a whopping 88%. That would be a disturbing experience. And the ride hasn’t got any smoother in recent times over the last year, with the price 43% lower in that time. Unfortunately the share price momentum is still quite negative, with prices down 27% in thirty days. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Check out our latest analysis for Sunlands Technology Group
Sunlands Technology Group isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Over three years, Sunlands Technology Group grew revenue at 19% per year. That’s a pretty good rate of top-line growth. So it seems unlikely the 24% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don’t lose the lesson.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
The last twelve months weren’t great for Sunlands Technology Group shares, which cost holders 43%, while the market was up about 58%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn’t as bad as the 24% per annum loss investors have suffered over the last three years. We’d need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. It’s always interesting to track share price performance over the longer term. But to understand Sunlands Technology Group better, we need to consider many other factors. Even so, be aware that Sunlands Technology Group is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable…
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. 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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