Unless you borrow money to invest, the potential losses are limited. But when you pick a company that is really flourishing, you can make more than 100%. For example, the 8I Holdings Limited (ASX:8IH) share price has soared 178% in the last year. Most would be very happy with that, especially in just one year! In more good news, the share price has risen 85% in thirty days. In contrast, the longer term returns are negative, since the share price is 14% lower than it was three years ago.
8I Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
8I Holdings actually shrunk its revenue over the last year, with a reduction of 50%. We're a little surprised to see the share price pop 178% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling 8I Holdings stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that 8I Holdings has rewarded shareholders with a total shareholder return of 178% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 11% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand 8I Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with 8I Holdings (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Of course 8I Holdings 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 AU exchanges.
This article by Simply Wall St is general in nature. 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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