For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the OrganiGram Holdings Inc. (TSE:OGI) share price. It's 512% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. On the other hand, the stock price has retraced 9.5% in the last week.
We love happy stories like this one. The company should be really proud of that performance!
OrganiGram Holdings 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. When a company doesn't make profits, we'd generally expect to see good 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 5 years OrganiGram Holdings saw its revenue grow at 76% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 44%(per year) over the same period. Despite the strong run, top performers like OrganiGram Holdings have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
OrganiGram Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for OrganiGram Holdings in this interactive graph of future profit estimates.
A Different Perspective
Investors in OrganiGram Holdings had a tough year, with a total loss of 59%, against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 44%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 2 warning signs for OrganiGram Holdings that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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