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Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. Take, for example Savannah Energy PLC (LON:SAVE). Its share price is already up an impressive 105% in the last twelve months. Also pleasing for shareholders was the 34% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. It is also impressive that the stock is up 104% over three years, adding to the sense that it is a real winner.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Savannah Energy
Given that Savannah Energy only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Savannah Energy grew its revenue by 9.9% last year. That's not great considering the company is losing money. So we wouldn't have expected the share price to rise by 105%. We're happy that investors have made money, though we wonder if the increase will be sustained. It's quite likely that the market is considering other factors, not just revenue growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Savannah Energy has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Savannah Energy in this interactive graph of future profit estimates.
A Different Perspective
We're pleased to report that Savannah Energy shareholders have received a total shareholder return of 105% over one year. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Savannah Energy (at least 1 which is concerning) , and understanding them should be part of your investment process.