As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame Hims & Hers Health, Inc. (NYSE:HIMS) shareholders if they were still in shock after the stock dropped like a lead balloon, down 79% in just one year. That'd be enough to make even the strongest stomachs churn. We wouldn't rush to judgement on Hims & Hers Health because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 42% in the last 90 days.
On a more encouraging note the company has added US$57m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
Hims & Hers Health 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.
Hims & Hers Health grew its revenue by 73% over the last year. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 79% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Given that the market gained 2.3% in the last year, Hims & Hers Health shareholders might be miffed that they lost 79%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 42% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Hims & Hers Health , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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.