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We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Landec Corporation (NASDAQ:LNDC), share price is up over the last year, but its gain of 26% trails the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 20% in three years.
Landec 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last year Landec saw its revenue shrink by 4.6%. The lacklustre gain of 26% over twelve months, is not a bad result given the falling revenue. We'd want to see progress to profitability before getting too interested in this stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Landec stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Landec shareholders are up 26% for the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 0.3% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Landec .
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. 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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