Investing can be hard but the potential fo an individual stock to pay off big time inspires us. But when you hold the right stock for the right time period, the rewards can be truly huge. One bright shining star stock has been Wide Open Agriculture Limited (ASX:WOA), which is 446% higher than three years ago. Unfortunately, though, the stock has dropped 3.2% over a week.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Wide Open Agriculture 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Wide Open Agriculture's revenue trended up 89% each year over three years. That's well above most pre-profit companies. And it's not just the revenue that is taking off. The share price is up 76% per year in that time. It's always tempting to take profits after a share price gain like that, but high-growth companies like Wide Open Agriculture can sometimes sustain strong growth for many years. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Wide Open Agriculture's financial health with this free report on its balance sheet.
A Different Perspective
Wide Open Agriculture shareholders are down 27% for the year, but the broader market is up 20%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 76% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Even so, be aware that Wide Open Agriculture is showing 4 warning signs in our investment analysis , and 1 of those is significant...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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