It's been a soft week for R.E.A. Holdings plc (LON:RE.) shares, which are down 11%. Despite this, the stock is a strong performer over the last year, no doubt about that. Indeed, the share price is up an impressive 139% in that time. So some might not be surprised to see the price retrace some. The real question is whether the business is trending in the right direction.
While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
R.E.A. 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last twelve months, R.E.A. Holdings' revenue grew by 26%. We respect that sort of growth, no doubt. While that revenue growth is pretty good the share price performance outshone it, with a lift of 139% as mentioned above. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. Of course, we are always cautious about succumbing to 'fear of missing out' when a stock has shot up strongly.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at R.E.A. Holdings' financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that R.E.A. Holdings shareholders have received a total shareholder return of 139% over one year. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand R.E.A. Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for R.E.A. Holdings you should know about.
We will like R.E.A. Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.