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One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the FINEOS Corporation Holdings plc (ASX:FCL) share price is up 62% in the last three years, clearly besting the market return of around 11% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 48%.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Because FINEOS Corporation Holdings 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 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 3 years FINEOS Corporation Holdings saw its revenue grow at 1.9% per year. That's not a very high growth rate considering it doesn't make profits. The modest growth is probably broadly reflected in the share price, which is up 17%, per year over 3 years. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that FINEOS Corporation Holdings shareholders have received a total shareholder return of 48% over the last year. There's no doubt those recent returns are much better than the TSR loss of 5% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before spending more time on FINEOS Corporation Holdings it might be wise to click here to see if insiders have been buying or selling shares.
If you are like me, then you will not want to miss this free list of undervalued small caps 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 Australian 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.