The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the First Majestic Silver Corp. (TSE:FR) share price has soared 161% in the last three years. How nice for those who held the stock! It's also good to see the share price up 21% over the last quarter. But this could be related to the strong market, which is up 10% in the last three months.
We don't think that First Majestic Silver's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 3 years First Majestic Silver saw its revenue grow at 12% per year. That's a very respectable growth rate. It's fair to say that the market has acknowledged the growth by pushing the share price up 38% per year. The business has made good progress on the top line, but the market is extrapolating the growth. It would be worth thinking about when profits will flow, since that milestone will attract more attention.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on First Majestic Silver
A Different Perspective
We're pleased to report that First Majestic Silver shareholders have received a total shareholder return of 129% over one year. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for First Majestic Silver 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 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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