Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the SelfWealth Limited (ASX:SWF) share price had more than doubled in just one year - up 292%. It's up an even more impressive 390% over the last quarter. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
SelfWealth isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Over the last twelve months, SelfWealth's revenue grew by 112%. That's a head and shoulders above most loss-making companies. Meanwhile, the market has paid attention, sending the share price soaring 292% in response. That sort of revenue growth is bound to attract attention, even if the company doesn't turn a profit. The strong share price rise indicates optimism, so there may be a better opportunity for buyers as the hype fades a bit.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
SelfWealth shareholders should be happy with the total gain of 292% over the last twelve months. And the share price momentum remains respectable, with a gain of 390% in the last three months. This suggests the company is continuing to win over new investors. 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. Take risks, for example - SelfWealth has 5 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
SelfWealth 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 AU 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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