Arqit Quantum (NASDAQ:ARQQ) investors are sitting on a loss of 40% if they invested a year ago
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Arqit Quantum Inc. (NASDAQ:ARQQ) have tasted that bitter downside in the last year, as the share price dropped 40%. That's disappointing when you consider the market declined 20%. We wouldn't rush to judgement on Arqit Quantum because we don't have a long term history to look at. In the last ninety days we've seen the share price slide 63%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Arqit Quantum
Arqit Quantum isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Arqit Quantum increased its revenue by 51,385%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 40% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We doubt Arqit Quantum shareholders are happy with the loss of 40% over twelve months. That falls short of the market, which lost 20%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. It's worth noting that the last three months did the real damage, with a 63% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Arqit Quantum you should know about.
Arqit Quantum is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
