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Does Avantium's (AMS:AVTX) Share Price Gain of 23% Match Its Business Performance?

Simply Wall St

It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Avantium N.V. (AMS:AVTX), which saw its share price increase 23% in the last year, slightly above the market return of around 20% (not including dividends). 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 Avantium

Avantium isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Avantium actually shrunk its revenue over the last year, with a reduction of 25%. The stock is up 23% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

ENXTAM:AVTX Income Statement, December 21st 2019

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

In the last year the market returned about 25%, and Avantium generated a TSR of 23% for its shareholders. A substantial portion of that gain has come in the last three months, with the stock up 16% in that time. It could be that word is spreading about its positive business attributes. You could get a better understanding of Avantium's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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 NL exchanges.

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.

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.