The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of GrowGeneration Corp. (NASDAQ:GRWG) stock is up an impressive 209% over the last five years. And in the last month, the share price has gained 45%. This could be related to the recent financial results that were recently released - you could check the most recent data by reading our company report.
Since the stock has added US$65m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
GrowGeneration 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. 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.
In the last 5 years GrowGeneration saw its revenue grow at 60% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 25% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes GrowGeneration worth investigating - it may have its best days ahead.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on GrowGeneration's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that GrowGeneration shareholders are down 86% for the year. Unfortunately, that's worse than the broader market decline of 10%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 25%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - GrowGeneration has 2 warning signs we think you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
