It is a pleasure to report that the Digital Turbine, Inc. (NASDAQ:APPS) is up 296% in the last quarter. But only the myopic could ignore the astounding decline over three years. In that time the share price has melted like a snowball in the desert, down 90%. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Digital Turbine

Because Digital Turbine 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. Shareholders of unprofitable companies usually desire strong revenue growth. 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.

In the last three years Digital Turbine saw its revenue shrink by 15% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 24%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

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 Digital Turbine in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that Digital Turbine shareholders have received a total shareholder return of 40% over one year. That certainly beats the loss of about 4% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Digital Turbine better, we need to consider many other factors. Even so, be aware that Digital Turbine is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are 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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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.