Shareholders in ActiveOps (LON:AOM) have lost 49%, as stock drops 23% this past week

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by ActiveOps Plc (LON:AOM) shareholders over the last year, as the share price declined 49%. That's disappointing when you consider the market returned 5.8%. Because ActiveOps hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 43% in about a quarter. That's not much fun for holders.

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

Check out our latest analysis for ActiveOps

Given that ActiveOps 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. 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.

In the last twelve months, ActiveOps increased its revenue by 10.0%. That's not a very high growth rate considering it doesn't make profits. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 49% in a year. In a hot market it's easy to forget growth is the life-blood of a loss making company. But if you buy a loss making company then you could become a loss making investor.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Given that the market gained 5.8% in the last year, ActiveOps shareholders might be miffed that they lost 49%. 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 43%, 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. It's always interesting to track share price performance over the longer term. But to understand ActiveOps better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for ActiveOps (of which 1 is potentially serious!) you should know about.

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 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.