Shares Trust the leader (London Stock Exchange: Trieste) -Entered the market through an initial public offering (IPO) in March-experienced a sharp correction. At the beginning of September, Trustpilot’s stock price was close to 480 pence. However, yesterday, the stock closed at 330 pence.
So what is the stock price of Trustpilot? Does the recent weakness create an attractive buying opportunity for long-term growth investors like me?
Why did Trustpilot’s share price fall
In my opinion, there are two main reasons for the recent decline in Trustpilot’s stock price.the first is Results for the first half of 2021It was released on September 15, which was a bit disappointing.
Although revenue during the period increased by 31% (22% at a constant exchange rate) to $62 million, the company reported a huge loss of $17.2 million due to IPO expenses. This is much larger than the loss of US$5.8 million in the first half of 2020. Earnings per share are-4.35 US dollars, and the first half of 2020 is-1.59 US dollars.
What shocked investors was the prospects for the second half of the year. Although the group stated that it expects the full-year currency revenue growth rate to be in line with the first half of FY21, it also said that booking growth in the second half of the year may be slightly lower than that in the first half of the year.
This is because the booking performance in the first half of the year (37% real growth, 28% constant currency growth) reflects “Restoration factors“And the damage caused by Covid-19 a year ago has accelerated again.
The second reason for the recent share price decline is that yesterday institutional investors sold 41.1 million shares at a sharp discount to the previous day’s closing price.
These institutions sold Trustpilot shares at a price of 345 pence per share, a 9% discount to Tuesday’s closing price. The fact that the stock is sold at such a large discount shows that the current demand for the stock is not high. The news of accelerating the additional issuance of bookkeeping caused TRST’s share price to fall by 12.8%.
Should I buy Trustpilot stock today?
As for whether I should buy Trustpilot stocks for my portfolio after the recent stock price drop, I don’t believe that buying stocks is a good idea.
Of course, the company also has something I like.For example, recently Grow impressive. Between fiscal year 2018 and fiscal year 2020, revenue climbed from $64.3 million to $102 million. This year, analysts expect revenue to be 130 million U.S. dollars.
Trustpilot seems to benefit from the growth of e-commerce. The more things we buy online, the more important business reviews become.
However, in my opinion, the valuation here is quite steep. Currently, the market value of Trustpilot is approximately £1.4 billion. This means that the forward-looking market-to-sales ratio is about 15. This is relatively high.
In my opinion, Trustpilot is still incurring huge losses, and the risk/reward proposition does not look good.
Of course, as Trustpilot continues to grow, the stock price may rebound. However, considering all factors, I think I can buy better growth stocks today.
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Edward Shelton There is no position in any of the above-mentioned shares. The Motley Fool UK has no position in any of the aforementioned stocks. The views expressed by the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a variety of different insights, We are better investors.