The five-year returns have been notable for Aspen Aerogels (NYSE:ASPN) shareholders despite underlying losses increasing
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Aspen Aerogels, Inc. (NYSE:ASPN) shareholders have enjoyed a 68% share price rise over the last half decade, well in excess of the market return of around 52% (not including dividends).
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Aspen Aerogels
Because Aspen Aerogels made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
For the last half decade, Aspen Aerogels can boast revenue growth at a rate of 8.0% per year. That's a pretty good long term growth rate. While the share price has beat the market, compounding at 11% yearly, over five years, there's certainly some potential that the market hasn't fully considered the growth track record. If revenue growth can maintain for long enough, it's likely profits will flow. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Aspen Aerogels stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Aspen Aerogels had a tough year, with a total loss of 22%, against a market gain of about 16%. 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 11%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Aspen Aerogels you should be aware of, and 1 of them is concerning.
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 American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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