Further weakness as Compass (NYSE:COMP) drops 16% this week, taking one-year losses to 83%

As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. It must have been painful to be a Compass, Inc. (NYSE:COMP) shareholder over the last year, since the stock price plummeted 83% in that time. That'd be enough to make even the strongest stomachs churn. We wouldn't rush to judgement on Compass because we don't have a long term history to look at. Furthermore, it's down 35% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

With the stock having lost 16% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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Compass isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last twelve months, Compass increased its revenue by 23%. That's definitely a respectable growth rate. Unfortunately, the market wanted something better, given it sent the share price 83% lower during the year. It could be that the losses are too much for investors to handle without losing their nerve. We'd posit that the future looks challenging, given the disconnect between revenue growth and the share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Compass

A Different Perspective

Compass shareholders are down 83% for the year, even worse than the market loss of 23%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 35% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Compass that you should be aware of before investing here.

Compass 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 US 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.