The 68% drop in the share price of Voyager Digital Ltd. over the last three months is likely to concern some shareholders. The stock has been shining brightly over the past three years, like a diamond. In fact, the share price has increased by 903% in that time. Taking the longer-term performance into account, you might argue that the recent drop in share price isn’t too noteworthy. A share price increase could indicate that the business has dramatically improved in that time.
While the stock has fallen 16% this week, it’s worth focusing on the long term and seeing if the stock’s historical returns have been driven by the underlying fundamentals.
Voyager Digital wasn’t profitable in the last twelve months, it is unlikely to see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn’t make profits, one would generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case, one does expect good top-line growth.
Over the last three years, Voyager Digital has grown its revenue at 153% annually. That’s much better than most loss-making companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 116% per year, over the same period. It’s always tempting to take profits after a share price gain like that, but high-growth companies like Voyager Digital can sometimes sustain strong growth for many years. So it may be time to take a closer look at this one, or even put it on your watchlist.
You can see how earnings and revenue have changed over time in the image below:
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, earnings and revenue growth trends seem to be even more important factors to consider.
A Different Perspective
Over the last year, Voyager Digital shareholders took a loss of 84%. In contrast, the market gained about 6.8%. Of course, the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 116% per year, much better than the more recent returns. Sometimes when a good quality long-term winner has a weak period, it turns out to be an opportunity, but you really need to be sure that the quality is there. 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.
See previous predictions on stock here and whether VGX is still a buy //coinvoyagers.com/voyager-digital-ltd-earnings-missed-analyst-estimates-heres-what-analysts-are-forecasting-now-simply-wall-st/