It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Actinogen Medical Limited (ASX:ACW), who have seen the share price tank a massive 78% over a three year period. That would certainly shake our confidence in the decision to own the stock.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Actinogen Medical

Actinogen Medical isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over three years, Actinogen Medical grew revenue at 47% per year. That is faster than most pre-profit companies. So why has the share priced crashed 21% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

Actinogen Medical shareholders are down 19% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild 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 business. 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. Take risks, for example - Actinogen Medical has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Actinogen Medical is not the only stock that insiders are buying. For those who like to find lesser know companies 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 Australian 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.