Is Family Zone Cyber Safety's (ASX:FZO) 194% Share Price Increase Well Justified?

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Family Zone Cyber Safety Limited (ASX:FZO) share price had more than doubled in just one year - up 194%. It's also good to see the share price up 14% over the last quarter. But this could be related to the strong market, which is up 10% in the last three months. Unfortunately the longer term returns are not so good, with the stock falling 17% in the last three years.

See our latest analysis for Family Zone Cyber Safety

Given that Family Zone Cyber Safety 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Family Zone Cyber Safety grew its revenue by 22% last year. We respect that sort of growth, no doubt. While that revenue growth is pretty good the share price performance outshone it, with a lift of 194% as mentioned above. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Pleasingly, Family Zone Cyber Safety's total shareholder return last year was 194%. That certainly beats the loss of about 5% per year over three years. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Family Zone Cyber Safety (of which 1 shouldn't be ignored!) you should know about.

Family Zone Cyber Safety is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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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