musicMagpie plc (LON:MMAG) shareholders should be happy to see the share price up 17% in the last month. But that is meagre solace when you consider how the price has plummeted over the last year. Indeed, the share price is down a whopping 73% in the last year. Arguably, the recent bounce is to be expected after such a bad drop. The bigger issue is whether the company can sustain the momentum in the long term.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
musicMagpie isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 just one year musicMagpie saw its revenue fall by 5.1%. That’s not what investors generally want to see. The share price fall of 73% in a year tells the story. That’s a stern reminder that profitless companies need to grow the top line, at the very least. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think musicMagpie will earn in the future (free profit forecasts).
A Different Perspective
We doubt musicMagpie shareholders are happy with the loss of 73% over twelve months. That falls short of the market, which lost 0.5%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. With the stock down 68% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It’s always interesting to track share price performance over the longer term. But to understand musicMagpie better, we need to consider many other factors. Take risks, for example – musicMagpie has 3 warning signs we think you should be aware of.
musicMagpie 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 GB 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.