Ooma (NYSE:OOMA) adds US$59m to market cap in the past 7 days, though investors from three years ago are still down 43%

This week we saw the Ooma, Inc. (NYSE:OOMA) share price climb by 26%. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 43% in the last three years, falling well short of the market return.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Ooma

Because Ooma 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. 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.

Over three years, Ooma grew revenue at 11% per year. That's a fairly respectable growth rate. Shareholders have endured a share price decline of 13% per year. So the market has definitely lost some love for the stock. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. If you are thinking of buying or selling Ooma stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Investors in Ooma had a tough year, with a total loss of 24%, against a market gain of about 23%. 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 1.6% 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. 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. Even so, be aware that Ooma is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.