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Is TeraGo's (TSE:TGO) 123% Share Price Increase Well Justified?

Simply Wall St

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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is TeraGo Inc. (TSE:TGO) which saw its share price drive 123% higher over five years.

See our latest analysis for TeraGo

Because TeraGo is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years TeraGo saw its revenue grow at 1.8% per year. Put simply, that growth rate fails to impress. So we wouldn't have expected to see the share price to have lifted 17% for each year during that time, but that's what happened. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. It may be that the market is pretty optimistic about TeraGo.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

TSX:TGO Income Statement, April 3rd 2019

This free interactive report on TeraGo's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that TeraGo shareholders have received a total shareholder return of 90% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 17% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 editorial-team@simplywallst.com. 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.