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Did The Underlying Business Drive Freshpet's (NASDAQ:FRPT) Lovely 349% Share Price Gain?

Simply Wall St

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We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. But when you hold the right stock for the right time period, the rewards can be truly huge. One such superstar is Freshpet, Inc. (NASDAQ:FRPT), which saw its share price soar 349% in three years. On top of that, the share price is up 13% in about a quarter.

Check out our latest analysis for Freshpet

Freshpet 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years Freshpet has grown its revenue at 18% annually. That's pretty nice growth. Arguably the very strong share price gain of 65% a year is very generous when compared to the revenue growth. After a price rise like that many will have the business, and plenty of them will be wondering whether the price moved too high, too fast.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

NasdaqGM:FRPT Income Statement, July 11th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Freshpet in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that Freshpet shareholders have gained 65% (in total) over the last year. But the three year TSR of 65% per year is even better. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.