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The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Harmoney Corp Limited (ASX:HMY) share price slid 45% over twelve months. That's disappointing when you consider the market returned 17%. Because Harmoney hasn't been listed for many years, the market is still learning about how the business performs.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Harmoney
Because Harmoney 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Harmoney's revenue didn't grow at all in the last year. In fact, it fell 7.4%. That's not what investors generally want to see. Shareholders have seen the share price drop 45% in that time. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.
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. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Harmoney in this interactive graph of future profit estimates.
A Different Perspective
Given that the market gained 17% in the last year, Harmoney shareholders might be miffed that they lost 45%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 5.9% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Harmoney 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.