Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by uCloudlink Group Inc. (NASDAQ:UCL) shareholders over the last year, as the share price declined 40%. That's disappointing when you consider the market returned 41%. uCloudlink Group may have better days ahead, of course; we've only looked at a one year period. The share price has dropped 41% in three months.
Because uCloudlink Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In just one year uCloudlink Group saw its revenue fall by 56%. That looks like a train-wreck result to investors far and wide. Meanwhile, the share price dropped by 40%. We would want to see improvements in the core business, and diminishing losses, before getting too excited about this one.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on uCloudlink Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 41% in the last year, uCloudlink Group shareholders might be miffed that they lost 40%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn't as bad as the 41% drop in the last three months. So it seems like some holders have been dumping the stock of late - and that's not bullish. 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. To that end, you should be aware of the 2 warning signs we've spotted with uCloudlink Group .
For those who like to find winning investments 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 US exchanges.
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