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%. For example, the Xaar plc (LON:XAR) share price had more than doubled in just one year - up 282%. Also pleasing for shareholders was the 60% gain in the last three months. Unfortunately the longer term returns are not so good, with the stock falling 28% in the last three years.
Xaar isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Xaar actually shrunk its revenue over the last year, with a reduction of 2.8%. We're a little surprised to see the share price pop 282% 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that Xaar shareholders have received a total shareholder return of 282% over the last year. There's no doubt those recent returns are much better than the TSR loss of 8% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For example, we've discovered 1 warning sign for Xaar that you should be aware of before investing here.
But note: Xaar 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 GB 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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