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The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Cannae Holdings, Inc. (NYSE:CNNE) have tasted that bitter downside in the last year, as the share price dropped 42%. That's well below the market decline of 20%. Even if you look out three years, the returns are still disappointing, with the share price down33% in that time. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 17% in the same timeframe.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Because Cannae Holdings 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Cannae Holdings increased its revenue by 26%. That's definitely a respectable growth rate. Unfortunately that wasn't good enough to stop the share price dropping 42%. This implies the market was expecting better growth. However, that's in the past now, and it's the future that matters most.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Cannae Holdings in this interactive graph of future profit estimates.
A Different Perspective
The last twelve months weren't great for Cannae Holdings shares, which performed worse than the market, costing holders 42%. Meanwhile, the broader market slid about 20%, likely weighing on the stock. The three-year loss of 10% 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Cannae Holdings .
Cannae Holdings 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.
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.