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Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Revasum, Inc. (ASX:RVS) share price had more than doubled in just one year - up 265%. On top of that, the share price is up 115% in about a quarter. Revasum hasn't been listed for long, so it's still not clear if it is a long term winner.
Since the stock has added US$34m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Revasum
Given that Revasum 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Revasum grew its revenue by 13% last year. That's not a very high growth rate considering it doesn't make profits. In contrast, the share price took off during the year, gaining 265%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Revasum's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Revasum shareholders have gained 265% over the last year. And the share price momentum remains respectable, with a gain of 115% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Revasum (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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