The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Domo, Inc. (NASDAQ:DOMO) share price is down 14% in the last year. That's well bellow the market return of 8.6%. Domo may have better days ahead, of course; we've only looked at a one year period. The share price has dropped 47% in three months.
Because Domo is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Domo increased its revenue by 27%. That's definitely a respectable growth rate. Unfortunately that wasn't good enough to stop the share price dropping 14%. You might even wonder if the share price was previously over-hyped. 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).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Domo
A Different Perspective
Given that the market gained 8.6% in the last year, Domo shareholders might be miffed that they lost 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn't as bad as the 47% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Domo 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.