Datto Holding (NYSE:MSP) investors are sitting on a loss of 14% 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. But if you buy individual stocks, you can do both better or worse than that. For example, the Datto Holding Corp. (NYSE:MSP) share price is down 14% in the last year. That contrasts poorly with the market return of 23%. Because Datto Holding hasn't been listed for many years, the market is still learning about how the business performs.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Datto Holding
While Datto Holding made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Datto Holding grew its revenue by 17% over the last year. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 14%. This implies the market was expecting better growth. However, that's in the past now, and it's the future that matters most.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Datto Holding
A Different Perspective
While Datto Holding shareholders are down 14% for the year, the market itself is up 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 7.7% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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