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Investors can approximate the average market return by buying 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 LENSAR, Inc. (NASDAQ:LNSR) share price is down 16% in the last year. That falls noticeably short of the market return of around 21%. Because LENSAR hasn't been listed for many years, the market is still learning about how the business performs. It's down 21% in about a quarter.
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.
LENSAR 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, LENSAR increased its revenue by 19%. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 16%. You might even wonder if the share price was previously over-hyped. But if revenue keeps growing, then at a certain point the share price would likely follow.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Given that the market gained 21% in the last year, LENSAR shareholders might be miffed that they lost 16%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. Notably, the loss over the last year isn't as bad as the 21% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. It's always interesting to track share price performance over the longer term. But to understand LENSAR better, we need to consider many other factors. For instance, we've identified 4 warning signs for LENSAR that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.