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Does Marlborough Wine Estates Group's (NZSE:MWE) Share Price Gain of 88% Match Its Business Performance?

Simply Wall St
·3 min read

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Marlborough Wine Estates Group Limited (NZSE:MWE) share price is up 88% in the last year, clearly besting the market return of around 12% (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 Marlborough Wine Estates Group

We don't think that Marlborough Wine Estates Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Marlborough Wine Estates Group grew its revenue by 19% last year. We respect that sort of growth, no doubt. Buyers pushed the share price 88% 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

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

Marlborough Wine Estates Group shareholders should be happy with the total gain of 88% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 94% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It's always interesting to track share price performance over the longer term. But to understand Marlborough Wine Estates Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Marlborough Wine Estates Group , and understanding them should be part of your investment process.

We will like Marlborough Wine Estates Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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.