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Did Changing Sentiment Drive LiveXLive Media's (NASDAQ:LIVX) Share Price Down A Painful 78%?

Simply Wall St

Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding LiveXLive Media, Inc. ( NASDAQ:LIVX ) during the five years that saw its share price drop a whopping 78%. And some of the more recent buyers are probably worried, too, with the stock falling 50% in the last year. Furthermore, it's down 41% in about a quarter. That's not much fun for holders.

See our latest analysis for LiveXLive Media

Because LiveXLive Media is loss-making, 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. 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 half decade, LiveXLive Media saw its revenue increase by 54% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 26% throughout that time. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqCM:LIVX Income Statement, September 17th 2019

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think LiveXLive Media will earn in the future (free profit forecasts) .

A Different Perspective

LiveXLive Media shareholders are down 50% for the year, but the market itself is up 4.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 26% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. 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.

LiveXLive Media 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.