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Did Business Growth Power SECOS Group's (ASX:SES) Share Price Gain of 118%?

Simply Wall St
·3 min read

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the SECOS Group Limited (ASX:SES) share price has soared 118% return in just a single year. Also pleasing for shareholders was the 12% gain in the last three months. But this could be related to the strong market, which is up 14% in the last three months. Looking back further, the stock price is 92% higher than it was three years ago.

Check out our latest analysis for SECOS Group

SECOS Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last twelve months, SECOS Group's revenue grew by 0.9%. That's not a very high growth rate considering it doesn't make profits. In contrast, the share price took off during the year, gaining 118%. The business will need a lot more growth to justify that increase. We're not so sure that revenue growth is driving the market optimism about the stock.

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

This free interactive report on SECOS Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that SECOS Group shareholders have received a total shareholder return of 118% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should be aware of the 3 warning signs we've spotted with SECOS Group .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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