Investing in stocks comes with the risk that the share price will fall. And there's no doubt that Digimarc Corporation (NASDAQ:DMRC) stock has had a really bad year. To wit the share price is down 61% in that time. Even if you look out three years, the returns are still disappointing, with the share price down53% in that time. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.
Because Digimarc 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Digimarc grew its revenue by 8.4% over the last year. While that may seem decent it isn't great considering the company is still making a loss. It's likely this muted growth has contributed to the share price decline of 61% in the last year. We'd want to see evidence that future revenue growth will be stronger before getting too interested. Of course, the market can be too impatient at times. Why not take a closer look at this one so you're ready to pounce if growth does accelerate.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Digimarc's financial health with this free report on its balance sheet.
A Different Perspective
Digimarc shareholders are down 61% for the year, but the market itself is up 19%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9.5% 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. Case in point: We've spotted 2 warning signs for Digimarc you should be aware of.
Of course Digimarc may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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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