It’s easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Investors in ICC Holdings, Inc. (NASDAQ:ICCH) have tasted that bitter downside in the last year, as the share price dropped 16%. That contrasts poorly with the market return of 3.1%. ICC Holdings hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. The silver lining is that the stock is up 2.4% in about a week.
Given that ICC Holdings only made minimal earnings in the last twelve months, we’ll focus on revenue to gauge its business development. Many high growth companies focus on growing revenue before profits, but if revenue is the focus, it really needs to grow. As you can imagine, it’s easy to imagine a fast growing company becoming (potentially very) profitable, but when revenue growth slows, then the potential upside often seems less impressive.
In the last year ICC Holdings saw its revenue grow by 6.2%. 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 16% in a year. It’s important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
If you are thinking of buying or selling ICC Holdings stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Given that the market gained 3.1% in the last year, ICC Holdings shareholders might be miffed that they lost 16%. 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 1.6%, 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.