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Generally speaking long term investing is the way to go. But unfortunately, some companies simply don’t succeed. For example the Innodata Inc. (NASDAQ:INOD) share price dropped 69% over five years. That’s not a lot of fun for true believers. Furthermore, it’s down 29% in about a quarter. That’s not much fun for holders.
Innodata isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years Innodata saw its revenue shrink by 0.2% per year. That’s not what investors generally want to see. With neither profit nor revenue growth, the loss of 21% per year doesn’t really surprise us. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Ultimately, it may be worth watching – should revenue pick up, the share price might follow.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market gained around 6.6% in the last year, Innodata shareholders lost 9.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn’t as bad as the 21% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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.
Innodata 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.
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 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.