Investors Waiting For The %EF%BF%BD%EF%BF%BD%EF%BF%BDBuy%EF%BF%BD%EF%BF%BD%EF%BF%BD Signal In Snowflake Stock


This week we saw the

Snowflake Inc. (NYSE:SNOW) share price climb by 15%. But that doesn't change the reality of under-performance over the last twelve months. In fact, the price has declined 41% in a year, falling short of the returns you could get by investing in an index fund.

While the stock has risen 15% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Because Snowflake 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year Snowflake saw its revenue grow by 98%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 41% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values). NYSE:SNOW Earnings and Revenue Growth August 4th 2022

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Snowflake in this

interactive graph of future profit estimates.

A Different Perspective

We doubt Snowflake shareholders are happy with the loss of 41% over twelve months. That falls short of the market, which lost 11%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 2.3% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. For instance, we've identified > 2 warning signs for Snowflake

that you should be aware of.

We will like Snowflake better if we see some big insider buys. While we wait, check out this

free list of growing companies with considerable, recent, insider 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source :

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