Did XTEK's (ASX:XTE) Share Price Deserve to Gain 24%?
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By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, XTEK Limited (ASX:XTE) shareholders have seen the share price rise 24% over three years, well in excess of the market return (20%, not including dividends).
Check out our latest analysis for XTEK
Given that XTEK didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
XTEK's revenue trended up 45% each year over three years. That's well above most pre-profit companies. The share price rise of 7.5% per year throughout that time is nice to see, and given the revenue growth, that gain seems somewhat justified. If that's the case, now might be the time to take a close look at XTEK. If the company is trending towards profitability then it could be very interesting.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
If you are thinking of buying or selling XTEK stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
XTEK shareholders are down 8.9% for the year, but the market itself is up 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 0.4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 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 AU 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.
