Investing in stocks comes with the risk that the share price will fall. Anyone who held Arco Platform Limited (NASDAQ:ARCE) over the last year knows what a loser feels like. The share price has slid 56% in that time. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 24% in three years. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.
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.
See our latest analysis for Arco Platform
Arco Platform isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Arco Platform grew its revenue by 34% over the last year. We think that is pretty nice growth. Meanwhile, the share price tanked 56%, suggesting the market had much higher expectations. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Arco Platform stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for Arco Platform shares, which cost holders 56%, while the market was up about 26%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 7% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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 1 warning sign we've spotted with Arco Platform .