The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Life360, Inc. (ASX:360) share price is down 30% in the last year. That contrasts poorly with the market return of 11%. Life360 may have better days ahead, of course; we've only looked at a one year period. In the last ninety days we've seen the share price slide 51%.

If the past week is anything to go by, investor sentiment for Life360 isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Life360

Life360 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last twelve months, Life360 increased its revenue by 40%. That's definitely a respectable growth rate. Unfortunately that wasn't good enough to stop the share price dropping 30%. This implies the market was expecting better growth. But if revenue keeps growing, then at a certain point the share price would likely follow.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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. This free report showing analyst forecasts should help you form a view on Life360

A Different Perspective

While Life360 shareholders are down 30% for the year, the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's worth noting that the last three months did the real damage, with a 51% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. 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. For instance, we've identified 3 warning signs for Life360 that you should be aware of.

Life360 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 AU 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.