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Is ALJ Regional Holdings' (NASDAQ:ALJJ) 251% Share Price Increase Well Justified?

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·3 min read
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) share price has soared 251% return in just a single year. In contrast, the stock has fallen 8.6% in the last 30 days. Zooming out, the stock is actually down 36% in the last three years.

View our latest analysis for ALJ Regional Holdings

ALJ Regional Holdings 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

ALJ Regional Holdings grew its revenue by 19% last year. We respect that sort of growth, no doubt. While that revenue growth is pretty good the share price performance outshone it, with a lift of 251% as mentioned above. Given that the business has made good progress on the top line, it would be worth taking a look at its path to profitability. Of course, we are always cautious about succumbing to 'fear of missing out' when a stock has shot up strongly.

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

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on ALJ Regional Holdings' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that ALJ Regional Holdings shareholders have received a total shareholder return of 251% over the last year. Notably the five-year annualised TSR loss of 11% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand ALJ Regional Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for ALJ Regional Holdings (of which 1 is a bit concerning!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.