Shareholders in Ai-Media Technologies (ASX:AIM) have lost 49%, as stock drops 14% this past week

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Ai-Media Technologies Limited (ASX:AIM) shareholders over the last year, as the share price declined 49%. That falls noticeably short of the market return of around 6.5%. Because Ai-Media Technologies hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.

If the past week is anything to go by, investor sentiment for Ai-Media Technologies isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Ai-Media Technologies

Given that Ai-Media Technologies 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. When a company doesn't make profits, we'd generally expect to see good 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.

Ai-Media Technologies grew its revenue by 52% over the last year. That's a strong result which is better than most other loss making companies. The share price drop of 49% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Ai-Media Technologies stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Given that the market gained 6.5% in the last year, Ai-Media Technologies shareholders might be miffed that they lost 49%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 28%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Ai-Media Technologies better, we need to consider many other factors. For instance, we've identified 3 warning signs for Ai-Media Technologies that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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