Investing in stocks comes with the risk that the share price will fall. And there’s no doubt that Zillow Group, Inc. (NASDAQ:ZG) stock has had a really bad year. The share price is down a hefty 64% in that time. However, the longer term returns haven’t been so bad, with the stock down 1.1% in the last three years. The falls have accelerated recently, with the share price down 29% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
On a more encouraging note the company has added US$549m 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.
See our latest analysis for Zillow Group
Because Zillow Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Zillow Group increased its revenue by 226%. That’s well above most other pre-profit companies. In contrast the share price is down 64% over twelve months. Yes, the market can be a fickle mistress. This could mean hype has come out of the stock because the bottom line is concerning investors. We’d definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
NasdaqGS:ZG Earnings and Revenue Growth May 24th 2022
Zillow Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Zillow Group in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 11% in the twelve months, Zillow Group shareholders did even worse, losing 64%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Zillow Group you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.