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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Natuzzi S.p.A. (NYSE:NTZ) which saw its share price drive 215% higher over five years. And in the last week the share price has popped 13%.
The past week has proven to be lucrative for Natuzzi investors, so let's see if fundamentals drove the company's five-year performance.
Check out our latest analysis for Natuzzi
Given that Natuzzi didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Natuzzi saw its revenue grow at 0.6% per year. That's not a very high growth rate considering the bottom line. In comparison, the share price rise of 26% per year over the last half a decade is pretty impressive. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. Some might suggest that the sentiment around the stock is rather positive.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Natuzzi's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market gained around 26% in the last year, Natuzzi shareholders lost 35%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 26%, 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. 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 Natuzzi you should be aware of.
Of course Natuzzi may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.