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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Flywire Corporation (NASDAQ:FLYW) have tasted that bitter downside in the last year, as the share price dropped 39%. That contrasts poorly with the market decline of 11%. We wouldn't rush to judgement on Flywire because we don't have a long term history to look at. Even worse, it's down 31% in about a month, which isn't fun at all. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Flywire
Flywire 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.
In the last year Flywire saw its revenue grow by 53%. That's a strong result which is better than most other loss making companies. The share price drop of 39% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Flywire 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 Flywire stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Flywire shareholders are down 39% 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. The share price decline has continued throughout the most recent three months, down 23%, 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. It's always interesting to track share price performance over the longer term. But to understand Flywire better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Flywire you should be aware of.