Porch Group, Inc. (NASDAQ:PRCH) shareholders should be happy to see the share price up 29% in the last month. But the last three years have seen a terrible decline. To wit, the share price sky-dived 86% in that time. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround. 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.
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.
See our latest analysis for Porch Group
Porch Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years, Porch Group saw its revenue grow by 53% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 23% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on Porch Group
A Different Perspective
Porch Group shareholders are down 47% for the year, but the broader market is up 17%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 23% per year over 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 Porch Group better, we need to consider many other factors. Take risks, for example - Porch Group has 2 warning signs (and 1 which is concerning) we think you should know about.