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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 Krispy Kreme, Inc. (NASDAQ:DNUT) have tasted that bitter downside in the last year, as the share price dropped 35%. That's well below the market decline of 21%. Krispy Kreme may have better days ahead, of course; we've only looked at a one year period. More recently, the share price has dropped a further 8.2% in a month. But this could be related to poor market conditions -- stocks are down 8.2% in the same time.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Krispy Kreme isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last twelve months, Krispy Kreme increased its revenue by 21%. That's definitely a respectable growth rate. Unfortunately that wasn't good enough to stop the share price dropping 35%. You might even wonder if the share price was previously over-hyped. However, that's in the past now, and it's the future that matters most.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We doubt Krispy Kreme shareholders are happy with the loss of 35% over twelve months (even including dividends). That falls short of the market, which lost 21%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 3.5% 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Krispy Kreme 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.