Over the last month the ORBCOMM Inc. (NASDAQ:ORBC) has been much stronger than before, rebounding by 77%. But that is meagre solace in the face of the shocking decline over three years. The share price has sunk like a leaky ship, down 76% in that time. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still.
ORBCOMM wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years, ORBCOMM saw its revenue grow by 12% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 38% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.
You can see below how earnings and revenue have changed over time (discover 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. This free report showing analyst forecasts should help you form a view on ORBCOMM
A Different Perspective
We regret to report that ORBCOMM shareholders are down 69% for the year. Unfortunately, that's worse than the broader market decline of 5.2%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. 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 ORBCOMM better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for ORBCOMM you should know about.
ORBCOMM 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.
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.
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