Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you’ll see some that fall short of the average. For example, the I.D. Systems, Inc. (NASDAQ:IDSY) share price return of 20% over three years lags the market return in the same period. In the last year the stock price gained, albeit only 1.5%.
I.D. Systems isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 3 years I.D. Systems saw its revenue grow at 14% per year. That’s pretty nice growth. The stock is up 6.4% per year over three years, which isn’t bad, but is nothing to write home about. Arguably, that means, the market (previously) expected stronger growth from the company. However, if you can reasonably expect profits in the next few years, this stock might belong on your watchlist.
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
I.D. Systems shareholders gained a total return of 1.5% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 2.2% per year for five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of I.D. Systems by clicking this link.
I.D. Systems 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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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.