On average, over time, stock markets tend to rise higher. This makes investing attractive. But if when you choose to buy stocks, some of them will be below average performers. Over the last year the Prospa Group Limited (ASX:PGL) share price is up 24%, but that's less than the broader market return. We'll need to follow Prospa Group for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
Because Prospa Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Prospa Group saw its revenue shrink by 41%. Given the revenue reduction the modest 24% share price rise over the year seems pretty decent. We'd want to see progress to profitability before getting too interested in this stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We're happy to report that Prospa Group are up 24% over the year. While it's always nice to make a profit on the stock market, we do note that the TSR was no better than the broader market return of about 31%. Shareholders are doubtless excited that the stock price has been doing even better lately, with a gain of 48% in just ninety days. It's worth taking note when returns accelerate, as it can indicate positive change in the underlying business, and winners often keep winning. 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. Take risks, for example - Prospa Group has 1 warning sign we think you should be aware of.
Prospa Group 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 AU exchanges.
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