While shareholders of ZOO Digital Group (LON:ZOO) are in the red over the last year, underlying earnings have actually grown

This month, we saw the ZOO Digital Group plc (LON:ZOO) up an impressive 67%. But that's small comfort given the dismal price performance over the last year. Specifically, the stock price slipped by 60% in that time. It's not that amazing to see a bounce after a drop like that. Of course, it could be that the fall was overdone.

While the stock has risen 44% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for ZOO Digital Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

ZOO Digital Group stole the show with its EPS rocketing, in the last year. The rate of growth may not be sustainable, but it is still really positive. As you can imagine, the share price action therefore perturbs us. So it's worth taking a look at some other metrics.

ZOO Digital Group managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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. You can see what analysts are predicting for ZOO Digital Group in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that ZOO Digital Group shareholders are down 60% for the year. Unfortunately, that's worse than the broader market decline of 0.4%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand ZOO Digital Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with ZOO Digital Group (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

ZOO Digital Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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