Investors ignore increasing losses at ESE Entertainment (CVE:ESE) as stock jumps 13% this past week

By
Simply Wall St
Published
January 09, 2022
TSXV:ESE
Source: Shutterstock

We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the ESE Entertainment Inc. (CVE:ESE), share price is up over the last year, but its gain of 15% trails the market return. ESE Entertainment hasn't been listed for long, so it's still not clear if it is a long term winner.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for ESE Entertainment

ESE Entertainment isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year ESE Entertainment saw its revenue grow by 1,728%. That's well above most other pre-profit companies. Let's face it the 15% share price gain in that time is underwhelming compared to the growth. It could be that the market is missing what growth investor Matt Joass calls 'the hidden power of inflection points'. It's possible that the market is worried about the losses, or simply that the growth was already priced in. Or, this could be worth adding to your watchlist.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
TSXV:ESE Earnings and Revenue Growth January 9th 2022

If you are thinking of buying or selling ESE Entertainment stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're happy to report that ESE Entertainment are up 15% over the year. Unfortunately this falls short of the market return of around 20%. Shareholders are doubtless excited that the stock price has been doing even better lately, with a gain of 16% in just ninety days. It's worth taking note when returns accelerate, as it can indicate positive change in the underlying business, and winners often keep winning. It's always interesting to track share price performance over the longer term. But to understand ESE Entertainment better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for ESE Entertainment you should be aware of.

If you are like me, then you will 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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.