Even the best stock pickers will make plenty of bad investments. And there’s no doubt that ActiveOps Plc (LON:AOM) stock has had a really bad year. To wit the share price is down 56% in that time. Because ActiveOps hasn’t been listed for many years, the market is still learning about how the business performs. Furthermore, it’s down 44% in about a quarter. That’s not much fun for holders.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Because ActiveOps made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
ActiveOps grew its revenue by 10.0% over the last year. That’s not a very high growth rate considering it doesn’t make profits. Without profits, and with revenue growth sluggish, you get a 56% loss for shareholders, over the year. We’d want to see evidence that future revenue growth will be stronger before getting too interested. When a stock falls hard like this, it can signal an over-reaction. Our preference is to wait for a fundamental improvements before buying, but now could be a good time for some research.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at ActiveOps’ financial health with this free report on its balance sheet.
A Different Perspective
While ActiveOps shareholders are down 56% for the year, the market itself is up 7.1%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 44%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for ActiveOps (of which 1 can’t be ignored!) you should know about.
But note: ActiveOps may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.