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Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Forterra, Inc. (NASDAQ:FRTA) share price has soared 238% return in just a single year. It's also good to see the share price up 15% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 6.5% in 90 days). Also impressive, the stock is up 166% over three years, making long term shareholders happy, too.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Forterra grew its earnings per share, moving from a loss to a profit.
When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).
We think that the revenue growth of 4.2% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Forterra has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We're pleased to report that Forterra rewarded shareholders with a total shareholder return of 238% over the last year. That's better than the annualized TSR of 39% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Forterra better, we need to consider many other factors. For instance, we've identified 2 warning signs for Forterra (1 makes us a bit uncomfortable) that you should be aware of.
But note: Forterra may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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