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Is Marley Spoon's (ASX:MMM) Share Price Gain Of 214% Well Earned?

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 Marley Spoon AG (ASX:MMM) share price has soared 214% return in just a single year. Better yet, the share price has gained 384% in the last quarter. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.

View our latest analysis for Marley Spoon

Because Marley Spoon made a loss in the last twelve months, 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

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In the last year Marley Spoon saw its revenue grow by 41%. We respect that sort of growth, no doubt. While that revenue growth is pretty good the share price performance outshone it, with a lift of 214% as mentioned above. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

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

ASX:MMM Income Statement April 22nd 2020
ASX:MMM Income Statement April 22nd 2020

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Marley Spoon shareholders should be happy with the total gain of 214% over the last twelve months. And the share price momentum remains respectable, with a gain of 384% in the last three months. This suggests the company is continuing to win over new investors. 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. To that end, you should learn about the 3 warning signs we've spotted with Marley Spoon (including 1 which is is concerning) .

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.

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.

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. Thank you for reading.