These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Efecte Oy (HEL:EFECTE) share price is up 56% in the last year, clearly besting the market return of around 9.0% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Efecte Oy hasn’t been listed for long, so it’s still not clear if it is a long term winner.
Efecte Oy isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Efecte Oy grew its revenue by 9.3% last year. That’s not great considering the company is losing money. In keeping with the revenue growth, the share price gained 56% in that time. While not a huge gain tht seems pretty reasonable. Given the market doesn’t seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Efecte Oy boasts a total shareholder return of 56% for the last year. And the share price momentum remains respectable, with a gain of 47% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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 2 warning signs with Efecte Oy , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI exchanges.
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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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