Shareholders have faith in loss-making ADX Energy (ASX:ADX) as stock climbs 18% in past week, taking one-year gain to 53%

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the ADX Energy Ltd (ASX:ADX) share price is up 53% in the last 1 year, clearly besting the market return of around 18% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! It is also impressive that the stock is up 44% over three years, adding to the sense that it is a real winner.

The past week has proven to be lucrative for ADX Energy investors, so let's see if fundamentals drove the company's one-year performance.

View our latest analysis for ADX Energy

ADX Energy 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year ADX Energy saw its revenue shrink by 25%. The stock is up 53% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on ADX Energy's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that ADX Energy shareholders have received a total shareholder return of 53% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that ADX Energy is showing 4 warning signs in our investment analysis , and 2 of those are significant...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

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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.