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When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Noumi Limited (ASX:NOU) share price has soared 138% in the last 1 year. Most would be very happy with that, especially in just one year! It's up an even more impressive 138% over the last quarter. On the other hand, longer term shareholders have had a tougher run, with the stock falling 42% in three years.
Since it's been a strong week for Noumi shareholders, let's have a look at trend of the longer term fundamentals.
Check out our latest analysis for Noumi
Given that Noumi 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Noumi grew its revenue by 6.9% last year. That's not great considering the company is losing money. So we wouldn't have expected the share price to rise by 138%. The business will need a lot more growth to justify that increase. We're not so sure that revenue growth is driving the market optimism about the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Noumi stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that Noumi shareholders have received a total shareholder return of 138% over the last year. Notably the five-year annualised TSR loss of 14% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Even so, be aware that Noumi is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
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.