The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Doma Holdings Inc. (NYSE:DOMA); the share price is down a whopping 78% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. Because Doma Holdings hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 66% in about a quarter. That's not much fun for holders.
With the stock having lost 30% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Doma Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Doma Holdings increased its revenue by 36%. That's definitely a respectable growth rate. Unfortunately, the market wanted something better, given it sent the share price 78% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Doma Holdings stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Given that the market gained 1.4% in the last year, Doma Holdings shareholders might be miffed that they lost 78%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 66% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Doma Holdings you should be aware of.
Doma Holdings 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.