Did Purple Innovation's (NASDAQ:PRPL) Share Price Deserve to Gain 11%?
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Purple Innovation, Inc. (NASDAQ:PRPL) share price is up 11% in the last year, clearly besting than the market return of around 1.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
Check out our latest analysis for Purple Innovation
Purple Innovation isn't a profitable company, so 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Purple Innovation grew its revenue by 36% last year. We respect that sort of growth, no doubt. Buyers pushed the share price 11% in response, which isn't unreasonable. If the company can maintain the revenue growth, the share price could go higher still. But it's crucial to check profitability and cash flow before forming a view on the future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Purple Innovation
A Different Perspective
Purple Innovation boasts a total shareholder return of 11% for the last year. We regret to report that the share price is down 4.0% over ninety days. Shorter term share price moves often don't signify much about the business itself. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Purple Innovation is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.
