The 19% return this week takes Establishment Labs Holdings' (NASDAQ:ESTA) shareholders three-year gains to 138%
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Establishment Labs Holdings Inc. (NASDAQ:ESTA) share price is 138% higher than it was three years ago. That sort of return is as solid as granite. It's also up 21% in about a month. We note that Establishment Labs Holdings reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
The past week has proven to be lucrative for Establishment Labs Holdings investors, so let's see if fundamentals drove the company's three-year performance.
View our latest analysis for Establishment Labs Holdings
Because Establishment Labs Holdings 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 expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 3 years Establishment Labs Holdings saw its revenue grow at 20% per year. That's a very respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 33% per year over three years. It's hard to value pre-profit businesses, but it seems like the market has become a lot more optimistic about this one! Some investors like to buy in just after a company becomes profitable, since that can be a powerful inflexion point.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
The last twelve months weren't great for Establishment Labs Holdings shares, which cost holders 1.4%, while the market was up about 5.2%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 33% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. 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. For instance, we've identified 2 warning signs for Establishment Labs Holdings that you should be aware of.
Establishment Labs Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
