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Is China Online Education Group's (NYSE:COE) Share Price Gain Of 273% Well Earned?

Simply Wall St

China Online Education Group (NYSE:COE) shareholders might be concerned after seeing the share price drop 10% in the last quarter. But that doesn't change the fact that the returns over the last year have been very strong. Like an eagle, the share price soared 273% in that time. So it may be that the share price is simply cooling off after a strong rise. The real question is whether the business is trending in the right direction.

Check out our latest analysis for China Online Education Group

Given that China Online Education Group only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last twelve months, China Online Education Group's revenue grew by 37%. That's a fairly respectable growth rate. While that revenue growth is pretty good the share price performance outshone it, with a lift of 273% 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. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NYSE:COE Earnings and Revenue Growth July 9th 2020

We know that China Online Education Group has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on China Online Education Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that China Online Education Group rewarded shareholders with a total shareholder return of 273% over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 15%. Given the track record of solid returns over varying time frames, it might be worth putting China Online Education Group on your watchlist. 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 China Online Education Group that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.

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