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For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. In the case of Zip Co Limited (ASX:ZIP), the share price is up an incredible 907% in the last year alone. Also pleasing for shareholders was the 50% gain in the last three months. On the other hand, longer term shareholders have had a tougher run, with the stock falling 52% in three years. Anyone who held for that rewarding ride would probably be keen to talk about it.
The past week has proven to be lucrative for Zip Co investors, so let's see if fundamentals drove the company's one-year performance.
See our latest analysis for Zip Co
We don't think that Zip Co's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. 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.
Zip Co grew its revenue by 28% last year. We respect that sort of growth, no doubt. But the market is even more excited about it, with the price apparently bound for the moon, up 907% in one of earth's orbits. We're always cautious when the share price is up so much, but there's certainly enough revenue growth to justify taking a closer look at Zip Co.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Zip Co will earn in the future (free profit forecasts).
A Different Perspective
It's good to see that Zip Co has rewarded shareholders with a total shareholder return of 907% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 2% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Zip Co better, we need to consider many other factors. For example, we've discovered 3 warning signs for Zip Co (1 can't be ignored!) that you should be aware of before investing here.