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Unless you borrow money to invest, the potential losses are limited. But if you pick the right stock, you can make a lot more than 100%. Take, for example Community Health Systems, Inc. (NYSE:CYH). Its share price is already up an impressive 155% in the last twelve months. It's also good to see the share price up 71% over the last quarter. Looking back further, the stock price is 80% higher than it was three years ago.
Community Health Systems wasn't profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Community Health Systems saw its revenue shrink by 11%. We're a little surprised to see the share price pop 155% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Community Health Systems' financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Community Health Systems shareholders have received a total shareholder return of 155% over the last year. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Community Health Systems better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Community Health Systems (at least 1 which is significant) , and understanding them should be part of your investment process.
We will like Community Health Systems better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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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