Shareholders have faith in loss-making Aware (NASDAQ:AWRE) as stock climbs 28% in past week, taking three-year gain to 38%

Investors can buy low cost index fund if they want to receive the average market return. But if you invest in individual stocks, some are likely to underperform. That's what has happened with the Aware, Inc. (NASDAQ:AWRE) share price. It's up 38% over three years, but that is below the market return. On the other hand, the more recent gain of 29% over a year is certainly pleasing.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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Because Aware made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.

Over the last three years Aware has grown its revenue at 2.2% annually. That's not a very high growth rate considering it doesn't make profits. It's probably fair to say that the modest growth is reflected in the modest share price gain of 11% per year. A closer look at the revenue and profit trends could uncover help us understand if the company will be profitable in the future.

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 consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Aware's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Aware shareholders have received a total shareholder return of 29% over the last year. Notably the five-year annualised TSR loss of 1.4% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 Aware you should be aware of.

Aware 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.