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Did The Underlying Business Drive Aspen Aerogels' (NYSE:ASPN) Lovely 333% Share Price Gain?

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Simply Wall St
·3 min read
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We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Aspen Aerogels, Inc. (NYSE:ASPN) share price. It's 333% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 49% over the last quarter.

See our latest analysis for Aspen Aerogels

Aspen Aerogels 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Aspen Aerogels can boast revenue growth at a rate of 1.6% per year. Put simply, that growth rate fails to impress. So shareholders should be pretty elated with the 34% increase per year, in that time. We don't think the growth over the period is that great, but it could be that faster growth appears to some to be on the horizon. It's not immediately obvious to us why the market has been so enthusiastic about the stock, but a more detailed look at revenue and profit trends might reveal why shareholders are optimistic.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that Aspen Aerogels shareholders have received a total shareholder return of 87% over one year. That's better than the annualised return of 34% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Aspen Aerogels has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.