Dropbox, Inc. (NASDAQ:DBX) shareholders should be happy to see the share price up 14% in the last month. But that is minimal compensation for the share price under-performance over the last year. After all, the share price is down 19% in the last year, significantly under-performing the market.
Check out our latest analysis for Dropbox
Given that Dropbox didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Dropbox grew its revenue by 19% over the last year. We think that is pretty nice growth. Meanwhile, the share price is down 19% over twelve months, which is disappointing given the progress made. This implies the market was expecting better growth. But if revenue keeps growing, then at a certain point the share price would likely follow.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
NasdaqGS:DBX Income Statement, March 2nd 2020
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Dropbox in this interactive graph of future profit estimates.
A Different Perspective
Given that the market gained 6.5% in the last year, Dropbox shareholders might be miffed that they lost 19%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 6.8% rebound in the last three months. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). 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. Take risks, for example – Dropbox has 1 warning sign we think you should be aware of.
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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