The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn’t blame iCAD, Inc. (NASDAQ:ICAD) shareholders if they were still in shock after the stock dropped like a lead balloon, down 76% in just one year. That’d be enough to make even the strongest stomachs churn. We note that it has not been easy for shareholders over three years, either; the share price is down 52% in that time. Unfortunately the share price momentum is still quite negative, with prices down 28% in thirty days. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
iCAD isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect 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.
In just one year iCAD saw its revenue fall by 5.2%. That looks pretty grim, at a glance. The market obviously agrees, since the share price tanked 76%. That’s a stern reminder that profitless companies need to grow the top line, at the very least. But markets do over-react, so there opportunity for investors who are willing to take the time to dig deeper and understand the business.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market lost about 18% in the twelve months, iCAD shareholders did even worse, losing 76%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example – iCAD has 1 warning sign we think you should be aware of.
iCAD is not the only stock that insiders are buying. 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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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.
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