Is CubicFarm Systems' (CVE:CUB) 138% Share Price Increase Well Justified?

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%. Take, for example CubicFarm Systems Corp. (CVE:CUB). Its share price is already up an impressive 138% in the last twelve months. Also pleasing for shareholders was the 33% gain in the last three months. But this could be related to the strong market, which is up 14% in the last three months. CubicFarm Systems hasn't been listed for long, so it's still not clear if it is a long term winner.

Check out our latest analysis for CubicFarm Systems

CubicFarm Systems 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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 CubicFarm Systems saw its revenue shrink by 4.2%. So we would not have expected the share price to rise 138%. It just goes to show the market doesn't always pay attention to the reported numbers. Of course, it could be that the market expected this revenue drop.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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 CubicFarm Systems will earn in the future (free profit forecasts).

A Different Perspective

It's nice to see that CubicFarm Systems shareholders have gained 138% over the last year. And the share price momentum remains respectable, with a gain of 33% in the last three months. This suggests the company is continuing to win over new investors. 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. To that end, you should learn about the 4 warning signs we've spotted with CubicFarm Systems (including 2 which can't be ignored) .

CubicFarm Systems 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 CA 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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