Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the LBT Innovations Limited (ASX:LBT) share price had more than doubled in just one year - up 110%. Also pleasing for shareholders was the 55% gain in the last three months. In contrast, the longer term returns are negative, since the share price is 48% lower than it was three years ago.
LBT Innovations isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year LBT Innovations saw its revenue shrink by 55%. We're a little surprised to see the share price pop 110% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on LBT Innovations's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that LBT Innovations has rewarded shareholders with a total shareholder return of 110% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% 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. If you would like to research LBT Innovations in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: LBT Innovations may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.