If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Innovent Biologics, Inc. (HKG:1801) share price is up 33% in the last year, clearly besting the market return of around 1.1% (not including dividends). So that should have shareholders smiling. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
Innovent Biologics isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Innovent Biologics saw its revenue grow by 516%. That's stonking growth even when compared to other loss-making stocks. The solid 33% share price gain goes down pretty well, but it's not necessarily as good as you might expect given the top notch revenue growth. So quite frankly it could be a good time to investigate Innovent Biologics in some detail. Since we evolved from monkeys, we think in linear terms by nature. So if growth goes exponential, opportunity may exist for the enlightened.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Innovent Biologics shareholders should be happy with the total gain of 33% over the last twelve months. The more recent returns haven't been as impressive as the longer term returns, coming in at just 5.1%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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 email@example.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.