If You Had Bought Resonance Health (ASX:RHT) Stock Three Years Ago, You Could Pocket A 855% Gain Today

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Not every pick can be a winner, but when you pick the right stock, you can win big. Take, for example, the Resonance Health Limited (ASX:RHT) share price, which skyrocketed 855% over three years. On top of that, the share price is up 31% in about a quarter.

Anyone who held for that rewarding ride would probably be keen to talk about it.

See our latest analysis for Resonance Health

Resonance Health 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Resonance Health's revenue trended up 15% each year over three years. That's pretty nice growth. Some shareholders might think that the share price rise of 112% per year is a lucky result, considering the level of revenue growth. A hot stock like this is usually well worth taking a closer look at, as long as you don't let the fear of missing out (FOMO) impact your thinking.

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

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

Investors in Resonance Health had a tough year, with a total loss of 19%, against a market gain of about 1.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 54% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 4 warning signs for Resonance Health that you should be aware of.

Of course Resonance Health 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.

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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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