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While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you find (and hold) a big winner, you can markedly improve your finances. For example, Babcock & Wilcox Enterprises, Inc. (NYSE:BW) has generated a beautiful 502% return in just a single year. On top of that, the share price is up 131% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. In contrast, the longer term returns are negative, since the share price is 82% lower than it was three years ago.
It really delights us to see such great share price performance for investors.
Babcock & Wilcox Enterprises isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong 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.
In the last year Babcock & Wilcox Enterprises saw its revenue shrink by 34%. This is in stark contrast to the splendorous stock price, which has rocketed 502% since this time a year ago. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. To us, a gain like this looks like speculation, but there might be historical trends to back it up.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's nice to see that Babcock & Wilcox Enterprises shareholders have received a total shareholder return of 502% over the last year. Notably the five-year annualised TSR loss of 14% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Babcock & Wilcox Enterprises better, we need to consider many other factors. For example, we've discovered 3 warning signs for Babcock & Wilcox Enterprises (2 make us uncomfortable!) that you should be aware of before investing here.
Babcock & Wilcox Enterprises is not the only stock that insiders are buying. 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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