It might be of some concern to shareholders to see the New Gold Inc. (TSE:NGD) share price down 13% in the last month. Despite this, the stock is a strong performer over the last year, no doubt about that. Indeed, the share price is up an impressive 105% in that time. So some might not be surprised to see the price retrace some. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.
New Gold 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.
New Gold actually shrunk its revenue over the last year, with a reduction of 10%. We're a little surprised to see the share price pop 105% in the last year. 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.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. This free report showing analyst forecasts should help you form a view on New Gold
A Different Perspective
It's nice to see that New Gold shareholders have received a total shareholder return of 105% over the last year. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Take risks, for example - New Gold has 1 warning sign we think you should be aware of.
New Gold 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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