The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example Eldorado Gold Corporation (TSE:ELD). Its share price is already up an impressive 138% in the last twelve months. Meanwhile the share price is 4.5% higher than it was a week ago. In contrast, the longer term returns are negative, since the share price is 54% lower than it was three years ago.
Eldorado Gold 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. 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.
Over the last twelve months, Eldorado Gold's revenue grew by 11%. That's not a very high growth rate considering it doesn't make profits. In contrast, the share price took off during the year, gaining 138%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Eldorado Gold stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's good to see that Eldorado Gold has rewarded shareholders with a total shareholder return of 138% in the last twelve months. That certainly beats the loss of about 23% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Eldorado Gold is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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