Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Candy Club Holdings Limited (ASX:CLB) share price had more than doubled in just one year - up 275%. Also pleasing for shareholders was the 80% gain in the last three months. Candy Club Holdings hasn't been listed for long, so it's still not clear if it is a long term winner.
Candy Club Holdings 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Candy Club Holdings saw its revenue grow by 72%. That's a head and shoulders above most loss-making companies. Meanwhile, the market has paid attention, sending the share price soaring 275% in response. That sort of revenue growth is bound to attract attention, even if the company doesn't turn a profit. The strong share price rise indicates optimism, so there may be a better opportunity for buyers as the hype fades a bit.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Candy Club Holdings shareholders should be happy with the total gain of 275% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 80% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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 for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Candy Club Holdings (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
Candy Club Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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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