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For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. For example, the Apollo Endosurgery, Inc. (NASDAQ:APEN) share price is up a whopping 429% in the last year, a handsome return in a single year. Also pleasing for shareholders was the 34% gain in the last three months. The longer term returns have not been as good, with the stock price only 0.8% higher than it was three years ago.
Apollo Endosurgery isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Apollo Endosurgery saw its revenue shrink by 6.3%. This is in stark contrast to the splendorous stock price, which has rocketed 429% since this time a year ago. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. While this gain looks like speculative buying to us, sometimes speculation pays off.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Apollo Endosurgery in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that Apollo Endosurgery shareholders have gained 429% (in total) over the last year. That's better than the annualized TSR of 0.3% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 5 warning signs for Apollo Endosurgery (1 can't be ignored) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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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