The Galaxy Resources (ASX:GXY) Share Price Has Gained 251%, So Why Not Pay It Some Attention?

By
Simply Wall St
Published
October 23, 2020

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%. One great example is Galaxy Resources Limited (ASX:GXY) which saw its share price drive 251% higher over five years. Also pleasing for shareholders was the 23% gain in the last three months.

View our latest analysis for Galaxy Resources

Galaxy Resources 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Galaxy Resources saw its revenue grow at 33% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 29% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Galaxy Resources worth investigating - it may have its best days ahead.

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

ASX:GXY Earnings and Revenue Growth October 23rd 2020

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 Galaxy Resources shareholders have received a total shareholder return of 62% over the last year. That's better than the annualised return of 29% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Galaxy Resources better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Galaxy Resources (including 1 which is is potentially serious) .

Of course Galaxy Resources 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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