Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Commvault Systems, Inc. (NASDAQ:CVLT) share price slid 34% over twelve months. That's well bellow the market return of 3.8%. At least the damage isn't so bad if you look at the last three years, since the stock is down 15% in that time. It's up 3.1% in the last seven days.
Given that Commvault Systems only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Commvault Systems's revenue didn't grow at all in the last year. In fact, it fell 1.8%. That's not what investors generally want to see. Shareholders have seen the share price drop 34% in that time. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
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 know that Commvault Systems has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Commvault Systems in this interactive graph of future profit estimates.
A Different Perspective
While the broader market gained around 3.8% in the last year, Commvault Systems shareholders lost 34%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.