Unfortunately, investing is risky – companies can and do go bankrupt. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example CropLogic Limited (ASX:CLI). Its share price is already up an impressive 114% in the last twelve months. It’s also good to see the share price up 18% over the last quarter. CropLogic hasn’t been listed for long, so it’s still not clear if it is a long term winner.
CropLogic isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year CropLogic saw its revenue grow by 5.8%. That’s not a very high growth rate considering it doesn’t make profits. So we wouldn’t have expected the share price to rise by 114%. We’re happy that investors have made money, though we wonder if the increase will be sustained. We’re not so sure that revenue growth is driving the market optimism about the stock.
You can see below how earnings and revenue have changed over time.
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
CropLogic shareholders should be happy with the total gain of 114% over the last twelve months. The more recent returns haven’t been as impressive as the longer term returns, coming in at just 18%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.