Unless you borrow money to invest, the potential losses are limited. But when you pick a company that is really flourishing, you can make more than 100%. Take, for example Cronos Australia Limited (ASX:CAU). Its share price is already up an impressive 119% in the last twelve months. Also pleasing for shareholders was the 79% gain in the last three months. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
Since it's been a strong week for Cronos Australia shareholders, let's have a look at trend of the longer term fundamentals.
Cronos Australia 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. 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.
Over the last twelve months, Cronos Australia's revenue grew by 1,267%. That's well above most other pre-profit companies. Meanwhile, the market has paid attention, sending the share price soaring 119% 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Cronos Australia's financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Cronos Australia shareholders have gained 119% over the last year. And the share price momentum remains respectable, with a gain of 79% in the last three months. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Cronos Australia (of which 2 don't sit too well with us!) you should know about.
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 AU exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.