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The past year for PagSeguro Digital (NYSE:PAGS) investors has not been profitable

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Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. It must have been painful to be a PagSeguro Digital Ltd. (NYSE:PAGS) shareholder over the last year, since the stock price plummeted 80% in that time. That'd be enough to make even the strongest stomachs churn. To make matters worse, the returns over three years have also been really disappointing (the share price is 71% lower than three years ago). The falls have accelerated recently, with the share price down 44% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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.

View our latest analysis for PagSeguro Digital

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Even though the PagSeguro Digital share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.

PagSeguro Digital managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

PagSeguro Digital is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling PagSeguro Digital stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

PagSeguro Digital shareholders are down 80% for the year, falling short of the market return. The market shed around 17%, no doubt weighing on the stock price. Shareholders have lost 20% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that PagSeguro Digital is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you are like me, then you will 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.

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