Investors Who Bought Galaxy Resources (ASX:GXY) Shares A Year Ago Are Now Up 202%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the Galaxy Resources Limited (ASX:GXY) share price has soared 202% return in just a single year. It's also good to see the share price up 14% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. In contrast, the longer term returns are negative, since the share price is 33% lower than it was three years ago.

Check out our latest analysis for Galaxy Resources

Given that Galaxy Resources didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last year Galaxy Resources saw its revenue shrink by 20%. So we would not have expected the share price to rise 202%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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 consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Galaxy Resources stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Galaxy Resources' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Galaxy Resources hasn't been paying dividends, but its TSR of 205% exceeds its share price return of 202%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's good to see that Galaxy Resources has rewarded shareholders with a total shareholder return of 205% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Galaxy Resources you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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