Facedrive Inc. (CVE:FD) shareholders will doubtless be very grateful to see the share price up 120% in the last month. But that isn't much consolation for the painful drop we've seen in the last year. Specifically, the stock price nose-dived 88% in that time. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
On a more encouraging note the company has added CA$52m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
Facedrive 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Facedrive saw its revenue grow by 428%. That's well above most other pre-profit companies. So the hefty 88% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Facedrive's earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 3.9% in the last year, Facedrive shareholders might be miffed that they lost 88%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 49% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). It's always interesting to track share price performance over the longer term. But to understand Facedrive better, we need to consider many other factors. Even so, be aware that Facedrive is showing 3 warning signs in our investment analysis , and 1 of those is significant...
Facedrive 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 CA 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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