PolyNovo (ASX:PNV) increases 7.7% this week, taking five-year gains to 147%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term PolyNovo Limited (ASX:PNV) shareholders would be well aware of this, since the stock is up 147% in five years. Also pleasing for shareholders was the 41% gain in the last three months.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for PolyNovo

While PolyNovo made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years PolyNovo saw its revenue grow at 37% per year. Even measured against other revenue-focussed companies, that's a good result. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 20% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. PolyNovo seems like a high growth stock - so growth investors might want to add it to their watchlist.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that PolyNovo has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling PolyNovo stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We're pleased to report that PolyNovo shareholders have received a total shareholder return of 27% over one year. That gain is better than the annual TSR over five years, which is 20%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 1 warning sign for PolyNovo that you should be aware of before investing here.

We will like PolyNovo better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.