Shareholders in Tuya (NYSE:TUYA) have lost 20%, as stock drops 10% this past week

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Tuya Inc. (NYSE:TUYA) share price slid 20% over twelve months. That's disappointing when you consider the market returned 15%. Because Tuya hasn't been listed for many years, the market is still learning about how the business performs. More recently, the share price has dropped a further 13% in a month.

With the stock having lost 10% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Tuya

Given that Tuya 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In just one year Tuya saw its revenue fall by 33%. That looks pretty grim, at a glance. The stock price has languished lately, falling 20% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Tuya's financial health with this free report on its balance sheet.

A Different Perspective

Given that the market gained 15% in the last year, Tuya shareholders might be miffed that they lost 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 10.0%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Tuya , and understanding them should be part of your investment process.

But note: Tuya may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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