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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Rayonier Advanced Materials Inc. (NYSE:RYAM). Its share price is already up an impressive 170% in the last twelve months. Also pleasing for shareholders was the 99% gain in the last three months. In contrast, the longer term returns are negative, since the share price is 52% lower than it was three years ago.
Rayonier Advanced Materials 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Rayonier Advanced Materials saw its revenue shrink by 5.1%. So we would not have expected the share price to rise 170%. It just goes to show the market doesn't always pay attention to the reported numbers. Of course, it could be that the market expected this revenue drop.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Rayonier Advanced Materials
A Different Perspective
It's nice to see that Rayonier Advanced Materials shareholders have received a total shareholder return of 170% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 7% 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. It's always interesting to track share price performance over the longer term. But to understand Rayonier Advanced Materials better, we need to consider many other factors. Even so, be aware that Rayonier Advanced Materials is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
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.
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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