Taking the occasional loss comes part and parcel with investing on the stock market. And unfortunately for Sumo Logic, Inc. (NASDAQ:SUMO) shareholders, the stock is a lot lower today than it was a year ago. The share price has slid 59% in that time. Because Sumo Logic hasn't been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 34% in the last three months.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Given that Sumo Logic 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.
In the last year Sumo Logic saw its revenue grow by 19%. We think that is pretty nice growth. Meanwhile, the share price tanked 59%, 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Sumo Logic's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Sumo Logic shareholders are down 59% for the year, even worse than the market loss of 12%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 34% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 5 warning signs for Sumo Logic (1 doesn't sit too well with us!) that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.