Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Lattice Semiconductor Corporation (NASDAQ:LSCC) share price has soared 149% in the last year. Most would be very happy with that, especially in just one year! On top of that, the share price is up 80% in about a quarter. It is also impressive that the stock is up 134% over three years, adding to the sense that it is a real winner.
Lattice Semiconductor isn't a profitable company, so 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Lattice Semiconductor grew its revenue by 3.3% last year. That's not a very high growth rate considering it doesn't make profits. So we wouldn't have expected the share price to rise by 149%. The business will need a lot more growth to justify that increase. We're not so sure that revenue growth is driving the market optimism about the stock.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Lattice Semiconductor will earn in the future (free profit forecasts)
A Different Perspective
It's nice to see that Lattice Semiconductor shareholders have received a total shareholder return of 149% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8.9% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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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