Introducing Reject Shop (ASX:TRS), The Stock That Zoomed 200% In The Last Year

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the The Reject Shop Limited (ASX:TRS) share price had more than doubled in just one year - up 200%. Meanwhile the share price is 4.4% higher than it was a week ago. It is also impressive that the stock is up 33% over three years, adding to the sense that it is a real winner.

View our latest analysis for Reject Shop

Given that Reject Shop only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. 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.

Reject Shop grew its revenue by 3.4% last year. That's not great considering the company is losing money. In contrast, the share price took off during the year, gaining 200%. The business will need a lot more growth to justify that increase. It's quite likely that the market is considering other factors, not just revenue growth.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Reject Shop will earn in the future (free profit forecasts).

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Reject Shop's total shareholder return (TSR) and its share price change, which we've covered above. 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. Reject Shop's TSR of 209% for the year exceeded its share price return, because it has paid dividends.

A Different Perspective

It's nice to see that Reject Shop shareholders have received a total shareholder return of 209% over the last year. That certainly beats the loss of about 4% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 Reject Shop you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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 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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