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Should Frequency Electronics (NASDAQ:FEIM) Be Disappointed With Their 34% Profit?

Simply Wall St

The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Frequency Electronics, Inc. (NASDAQ:FEIM) share price is 34% higher than it was a year ago, much better than the market return of around -2.7% (not including dividends) in the same period. That's a solid performance by our standards! However, the stock hasn't done so well in the longer term, with the stock only up 3.1% in three years.

Check out our latest analysis for Frequency Electronics

Given that Frequency Electronics didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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.

Frequency Electronics grew its revenue by 26% last year. That's a fairly respectable growth rate. While the share price performed well, gaining 34% over twelve months, you could argue the revenue growth warranted it. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NasdaqGM:FEIM Income Statement, August 27th 2019

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's nice to see that Frequency Electronics shareholders have received a total shareholder return of 34% over the last year. That certainly beats the loss of about 0.9% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Frequency Electronics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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.

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. Thank you for reading.