The 11% return this week takes Environment Friendly Holdings' (TSE:3777) shareholders five-year gains to 205%

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Environment Friendly Holdings Corp. (TSE:3777) stock is up an impressive 205% over the last five years. It's also good to see the share price up 17% over the last quarter. But this could be related to the strong market, which is up 12% in the last three months.

Since the stock has added JP¥1.8b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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Given that Environment Friendly Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Environment Friendly Holdings saw its revenue grow at 61% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 25% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. Environment Friendly Holdings seems like a high growth stock - so growth investors might want to add it to their watchlist.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

A Different Perspective

It's good to see that Environment Friendly Holdings has rewarded shareholders with a total shareholder return of 97% in the last twelve months. That gain is better than the annual TSR over five years, which is 25%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 - Environment Friendly Holdings has 1 warning sign we think you should be aware of.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese 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.