Investors in Marchex (NASDAQ:MCHX) have seen decent returns of 36% over the past three years

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20 hours ago

Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. Unfortunately for shareholders, while the Marchex, Inc. (NASDAQ:MCHX) share price is up 36% in the last three years, that falls short of the market return. Looking at more recent returns, the stock is up 19% in a year.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
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Marchex 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 hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Marchex actually saw its revenue drop by 3.9% per year over three years. The modest share price gain of 11% per year suggests holders are sanguine about the falling revenue. As a general rule we don't like it when a loss-making company isn't even growing revenue.
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. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Marchex in this interactive graph of future profit estimates.
It's nice to see that Marchex shareholders have received a total shareholder return of 19% over the last year. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Marchex better, we need to consider many other factors. Take risks, for example - Marchex has 1 warning sign we think you should be aware of.
Marchex is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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