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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. For example, the Covalon Technologies Ltd. (CVE:COV) share price has soared 200% in the last 1 year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 44% over the last quarter. And shareholders have also done well over the long term, with an increase of 55% in the last three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Covalon Technologies
Because Covalon Technologies 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. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over the last twelve months, Covalon Technologies' revenue grew by 16%. 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 200% 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.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's nice to see that Covalon Technologies shareholders have received a total shareholder return of 200% over the last year. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 2 warning signs for Covalon Technologies you should be aware of.