Even the best investor on earth makes unsuccessful investments. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame Asana, Inc. (NYSE:ASAN) shareholders if they were still in shock after the stock dropped like a lead balloon, down 88% in just one year. That'd be a striking reminder about the importance of diversification. Asana may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days. 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.
Since Asana has shed US$787m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Because Asana 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Asana saw its revenue grow by 59%. That's a strong result which is better than most other loss making companies. So the hefty 88% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. 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 probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Asana will earn in the future (free profit forecasts).
A Different Perspective
Asana shareholders are down 88% for the year, even worse than the market loss of 24%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 32%, suggesting an absence of enthusiasm from investors. 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. To that end, you should be aware of the 3 warning signs we've spotted with Asana .
Asana is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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