The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Ribbon Communications Inc. (NASDAQ:RBBN) share price is 37% higher than it was a year ago, much better than the market return of around 24% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 35% lower than it was three years ago.

While the stock has fallen 7.9% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Because Ribbon Communications 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. When a company doesn't make profits, we'd generally hope to see good 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.

Ribbon Communications actually shrunk its revenue over the last year, with a reduction of 3.0%. The stock is up 37% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

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 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 Ribbon Communications will earn in the future (free profit forecasts).

A Different Perspective

It's nice to see that Ribbon Communications shareholders have received a total shareholder return of 37% over the last year. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Ribbon Communications (1 can't be ignored) that you should be aware of.

Ribbon Communications 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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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.