Investors bid EcoSynthetix (TSE:ECO) up CA$26m despite increasing losses YoY, taking five-year CAGR to 7.3%

The simplest way to invest in stocks is to buy exchange traded funds. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the EcoSynthetix Inc. (TSE:ECO) share price is 42% higher than it was five years ago, which is more than the market average. It's also good to see that the stock is up 9.9% in a year.

The past week has proven to be lucrative for EcoSynthetix investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for EcoSynthetix

Because EcoSynthetix made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last half decade EcoSynthetix's revenue has actually been trending down at about 3.7% per year. Even though revenue hasn't increased, the stock actually gained 7%, per year, during the same period. It's probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

EcoSynthetix provided a TSR of 9.9% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand EcoSynthetix better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with EcoSynthetix .

EcoSynthetix is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.