While it may not be enough for some shareholders, we think it is good to see the Brilliant Earth Group, Inc. (NASDAQ:BRLT) share price up 24% in a single quarter. But that's not enough to compensate for the decline over the last twelve months. During that time the share price has sank like a stone, descending 62%. So the bounce should be viewed in that context. It may be that the fall was an overreaction.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Brilliant Earth Group 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.
In the last year Brilliant Earth Group saw its revenue grow by 32%. That's definitely a respectable growth rate. Meanwhile, the share price tanked 62%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Brilliant Earth Group in this interactive graph of future profit estimates.
A Different Perspective
Brilliant Earth Group shareholders are down 62% for the year, even worse than the market loss of 20%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. It's great to see a nice little 24% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Brilliant Earth Group you should know about.
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 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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