For us, stock picking is in large part the hunt for the truly magnificent stocks. You won’t get it right every time, but when you do, the returns can be truly splendid. For example, the TerraCom Limited (ASX:TER) share price is up a whopping 843% in the last three years, a handsome return for long term holders. On top of that, the share price is up 12% in about a quarter. But this could be related to the strong market, which is up 8.5% in the last three months.
It really delights us to see such great share price performance for investors.
Because TerraCom 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
TerraCom’s revenue trended up 112% each year over three years. That’s much better than most loss-making companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 111% per year, over the same period. Despite the strong run, top performers like TerraCom have been known to go on winning for decades. So we’d recommend you take a closer look at this one, or even put it on your watchlist.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We’re pleased to report that TerraCom shareholders have received a total shareholder return of 214% over one year. Notably the five-year annualised TSR loss of 5.6% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
TerraCom 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.
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 firstname.lastname@example.org. 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.