Investing in Archer Materials (ASX:AXE) five years ago would have delivered you a 400% gain
While Archer Materials Limited (ASX:AXE) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 16% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. In that time, the share price has soared some 400% higher! So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 37% drop, in the last year.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Archer Materials
Archer Materials 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. Shareholders of unprofitable companies usually expect strong 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.
For the last half decade, Archer Materials can boast revenue growth at a rate of 46% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 38%(per year) over the same period. Despite the strong run, top performers like Archer Materials have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Archer Materials stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Archer Materials had a tough year, with a total loss of 37%, against a market gain of about 8.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 38% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Archer Materials better, we need to consider many other factors. Even so, be aware that Archer Materials is showing 4 warning signs in our investment analysis , and 1 of those is a bit unpleasant...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
