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PolyNovo's (ASX:PNV) investors will be pleased with their respectable 97% return over the last five years

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the PolyNovo Limited (ASX:PNV) share price is up 97% in the last 5 years, clearly besting the market return of around 20% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 26%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for PolyNovo

Given that PolyNovo only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

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In the last 5 years PolyNovo saw its revenue grow at 37% per year. That's well above most pre-profit companies. While the compound gain of 15% per year is good, it's not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at PolyNovo. Opportunity lies where the market hasn't fully priced growth in the underlying business.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

We know that PolyNovo has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think PolyNovo will earn in the future (free profit forecasts).

A Different Perspective

It's nice to see that PolyNovo shareholders have received a total shareholder return of 26% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Case in point: We've spotted 1 warning sign for PolyNovo you should be aware of.

We will like PolyNovo better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.