Should You Buy Unity Software After the Stock Crashes 30%?
Shares of Unity Software (NYSE: U) were down over 30% last week after the company said revenue growth would slow to between 6% to 8% year over year in the second quarter. That is a massive deceleration from the first-quarter revenue increase of 36%. Management had said previously that it expects to grow revenue by about 30% per year over the long term.
However, the fast-growing gaming software provider entered the quarter trading at a high price-to-sales multiple over 15, which is expensive for a company expecting to report single-digit growth in the near term. When a company doesn't deliver the growth that is implied in the stock's high valuation, the stock usually falls.
But now that it has tumbled to new lows, should investors buy it expecting a rebound? Let's first review what management had to say during the earnings call.
Source Fool.com
