Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Gaia, Inc. (NASDAQ:GAIA) share price is 60% higher than it was a year ago, much better than the market return of around 18% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 14% lower than it was three years ago.
Given that Gaia didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last year Gaia saw its revenue grow by 22%. That's a fairly respectable growth rate. While the share price performed well, gaining 60% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Gaia's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that Gaia shareholders have received a total shareholder return of 60% over one year. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Gaia you should be aware of, and 1 of them shouldn't be ignored.
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 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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