Investing in Lifeway Foods (NASDAQ:LWAY) three years ago would have delivered you a 112% 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 if you buy shares in a really great company, you can more than double your money. To wit, the Lifeway Foods, Inc. (NASDAQ:LWAY) share price has flown 112% in the last three years. That sort of return is as solid as granite. The last week saw the share price soften some 4.1%.
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.
View our latest analysis for Lifeway Foods
While Lifeway Foods made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 3 years Lifeway Foods saw its revenue grow at 13% per year. That's a very respectable growth rate. It's fair to say that the market has acknowledged the growth by pushing the share price up 28% per year. 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Lifeway Foods' financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Lifeway Foods shareholders have received a total shareholder return of 8.1% over the last year. There's no doubt those recent returns are much better than the TSR loss of 5% 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 Lifeway Foods better, we need to consider many other factors. Take risks, for example - Lifeway Foods has 3 warning signs we think you should be aware of.
We will like Lifeway Foods 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.
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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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