Investing in Digimarc (NASDAQ:DMRC) three years ago would have delivered you a 109% gain
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. To wit, the Digimarc Corporation (NASDAQ:DMRC) share price has flown 109% in the last three years. Most would be happy with that. Also pleasing for shareholders was the 72% gain in the last three months.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Digimarc
Digimarc 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Digimarc's revenue trended up 10% each year over three years. That's pretty nice growth. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 28% per year over three years. The business has made good progress on the top line, but the market is extrapolating the growth. Some investors like to buy in just after a company becomes profitable, since that can be a powerful inflexion point.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Digimarc's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Digimarc has rewarded shareholders with a total shareholder return of 91% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Digimarc (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
But note: Digimarc may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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