In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Immersion Corporation (NASDAQ:IMMR) shareholders for doubting their decision to hold, with the stock down 44% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 41%. Furthermore, it's down 30% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 22% decline in the broader market, throughout the period.
Given that Immersion 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Immersion saw its revenue increase by 0.7% per year. That's not a very high growth rate considering it doesn't make profits. Given the weak growth, the share price fall of 11% isn't particularly surprising. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. It could be worth putting it on your watchlist and revisiting when it makes its maiden profit.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Immersion
A Different Perspective
While the broader market lost about 11% in the twelve months, Immersion shareholders did even worse, losing 41%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Immersion better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Immersion (including 1 which is is a bit unpleasant) .
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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