The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the TrueCar, Inc. (NASDAQ:TRUE) share price is down 29% in the last year. That contrasts poorly with the market return of 11%. Longer term investors have fared much better, since the share price is up 25% in three years. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.
View our latest analysis for TrueCar
Because TrueCar is loss-making, 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. 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, TrueCar increased its revenue by 9.4%. 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 29% in a year. It's important not to lose sight of the fact that profitless companies must grow. But if you buy a loss making company then you could become a loss making investor.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
TrueCar is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this freechart depicting consensus estimates.
A Different Perspective
Over the last year, TrueCar shareholders took a loss of 29%. In contrast the market gained about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 7.7% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this freelist 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 US exchanges.We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.