Shareholders in Inotiv (NASDAQ:NOTV) have lost 88%, as stock drops 33% this past week

As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Inotiv, Inc. (NASDAQ:NOTV), who have seen the share price tank a massive 88% over a three year period. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 65%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 37% in thirty days. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Since Inotiv has shed US$46m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Inotiv

Inotiv isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire 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 three years, Inotiv saw its revenue grow by 15% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 24% per year is due to the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider 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 Inotiv in this interactive graph of future profit estimates.

A Different Perspective

Inotiv shareholders are down 65% for the year, but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. 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 Inotiv better, we need to consider many other factors. Even so, be aware that Inotiv is showing 3 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

Inotiv is not the only stock that insiders are buying. For those who like to find lesser know companies 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 American 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.