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Fathom Holdings (NASDAQ:FTHM) shareholders have endured a 77% loss from investing in the stock a year ago

The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But serious investors should think long and hard about avoiding extreme losses. It must have been painful to be a Fathom Holdings Inc. (NASDAQ:FTHM) shareholder over the last year, since the stock price plummeted 77% in that time. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on Fathom Holdings because we don't have a long term history to look at. Furthermore, it's down 37% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

Check out our latest analysis for Fathom Holdings

Given that Fathom Holdings 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Fathom Holdings grew its revenue by 71% over the last year. That's well above most other pre-profit companies. So the hefty 77% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Fathom Holdings in this interactive graph of future profit estimates.

A Different Perspective

We doubt Fathom Holdings shareholders are happy with the loss of 77% over twelve months. That falls short of the market, which lost 18%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 37%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Fathom Holdings better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Fathom Holdings you should be aware of.

Fathom Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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