By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Novatti Group Limited (ASX:NOV), which is up 96%, over three years, soundly beating the market return of 3.0% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 29% in the last year.
Given that Novatti Group 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years Novatti Group has grown its revenue at 49% annually. That's well above most pre-profit companies. The share price rise of 25% per year throughout that time is nice to see, and given the revenue growth, that gain seems somewhat justified. If that's the case, now might be the time to take a close look at Novatti Group. If the company is trending towards profitability then it could be very interesting.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Novatti Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We're pleased to report that Novatti Group rewarded shareholders with a total shareholder return of 29% over the last year. That's better than the annualized TSR of 25% over the last three years. These improved returns 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 for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Novatti Group (at least 2 which can't be ignored) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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. Thank you for reading.
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