As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So spare a thought for the long term shareholders of Axis Auto Finance Inc. (CVE:AXIS); the share price is down a whopping 72% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 48% in the last year. The falls have accelerated recently, with the share price down 29% in the last three months. Of course, this share price action may well have been influenced by the 15% decline in the broader market, throughout the period.

See our latest analysis for Axis Auto Finance

Axis Auto Finance 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Axis Auto Finance grew revenue at 62% per year. That's well above most other pre-profit companies. So why has the share priced crashed 34% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Axis Auto Finance shareholders are down 48% for the year, falling short of the market return. Meanwhile, the broader market slid about 12%, likely weighing on the stock. The three-year loss of 34% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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 3 warning signs for Axis Auto Finance you should be aware of.

Axis Auto Finance 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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