Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the PRGX Global, Inc. (NASDAQ:PRGX) share price slid 39% over twelve months. That falls noticeably short of the market return of around 4.8%. On the bright side, the stock is actually up 16% in the last three years. The falls have accelerated recently, with the share price down 29% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Given that PRGX Global 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.
PRGX Global grew its revenue by 3.2% over the last year. That's not a very high growth rate considering it doesn't make profits. Given this lacklustre revenue growth, the share price drop of 39% seems pretty appropriate. In a hot market it's easy to forget growth is the life-blood of a loss making company. So remember, if you buy a profitless company then you risk being a profitless investor.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. This free report showing analyst forecasts should help you form a view on PRGX Global
A Different Perspective
Investors in PRGX Global had a tough year, with a total loss of 39%, against a market gain of about 4.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2.4% per year over five years. 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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.