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Further weakness as Despegar.com (NYSE:DESP) drops 26% this week, taking one-year losses to 50%

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Despegar.com, Corp. (NYSE:DESP) shareholders over the last year, as the share price declined 50%. That's disappointing when you consider the market declined 20%. Notably, shareholders had a tough run over the longer term, too, with a drop of 49% in the last three years. Furthermore, it's down 39% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

If the past week is anything to go by, investor sentiment for Despegar.com isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Despegar.com

Given that Despegar.com didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Despegar.com grew its revenue by 258% over the last year. That's well above most other pre-profit companies. The share price drop of 50% 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 monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

Take a more thorough look at Despegar.com's financial health with this free report on its balance sheet.

A Different Perspective

The last twelve months weren't great for Despegar.com shares, which performed worse than the market, costing holders 50%. The market shed around 20%, no doubt weighing on the stock price. Shareholders have lost 14% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. 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. It's always interesting to track share price performance over the longer term. But to understand Despegar.com better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Despegar.com .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.