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Volatility 101: Should HyreCar (NASDAQ:HYRE) Shares Have Dropped 21%?

Simply Wall St

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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the HyreCar Inc. (NASDAQ:HYRE) share price slid 21% over twelve months. That contrasts poorly with the market return of 6.6%. HyreCar hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. It's down 34% in about a quarter.

See our latest analysis for HyreCar

Because HyreCar is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last twelve months, HyreCar increased its revenue by 161%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 21% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

NasdaqCM:HYRE Income Statement, June 26th 2019

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider 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 HyreCar stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Given that the market gained 6.6% in the last year, HyreCar shareholders might be miffed that they lost 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's worth noting that the last three months did the real damage, with a 34% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

HyreCar is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.