If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Synertec Corporation Limited (ASX:SOP) share price is up 12% in the last year, clearly besting than the market return of around 1.5% (not including dividends). That’s a solid performance by our standards! Synertec hasn’t been listed for long, so it’s still not clear if it is a long term winner.
Because Synertec is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 Synertec saw its revenue grow by 90%. That’s well above most other pre-profit companies. While the share price gain of 12% over twelve months is pretty tasty, you might argue it doesn’t fully reflect the strong revenue growth. If that’s the case, now might be the time to take a close look at Synertec. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we’re seeing here?
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It’s nice to see that Synertec shareholders have gained 12% over the last year. We regret to report that the share price is down 2.0% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. If you would like to research Synertec in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course Synertec 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.