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When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Research Frontiers Incorporated (NASDAQ:REFR) share price has soared 222% in the last year. Most would be very happy with that, especially in just one year! It's also up 25% in about a month. Zooming out, the stock is actually down 34% in the last three years.
Because Research Frontiers is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Research Frontiers actually shrunk its revenue over the last year, with a reduction of 1.4%. So we would not have expected the share price to rise 222%. 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.
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. It might be well worthwhile taking a look at our free report on Research Frontiers's earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that Research Frontiers shareholders have received a total shareholder return of 222% over one year. Notably the five-year annualised TSR loss of 12% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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.
Research Frontiers is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.