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As every investor would know, you don't hit a homerun every time you swing. But serious investors should think long and hard about avoiding extreme losses. It must have been painful to be a F45 Training Holdings Inc. (NYSE:FXLV) shareholder over the last year, since the stock price plummeted 74% in that time. That'd be a striking reminder about the importance of diversification. Because F45 Training Holdings hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 61% in about a quarter. That's not much fun for holders.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Given that F45 Training 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, F45 Training Holdings increased its revenue by 119%. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 74% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, markets do over-react so share price drop may be too harsh.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think F45 Training Holdings will earn in the future (free profit forecasts).
A Different Perspective
F45 Training Holdings shareholders are down 74% for the year, even worse than the market loss of 15%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 61% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - F45 Training Holdings has 2 warning signs we think you should be aware of.
F45 Training 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.
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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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