Shareholders have faith in loss-making Observe Medical (OB:OBSRV) as stock climbs 24% in past week, taking one-year gain to 94%

By
Simply Wall St
Published
November 16, 2021
OB:OBSRV
Source: Shutterstock

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the Observe Medical ASA (OB:OBSRV) share price is 94% higher than it was a year ago, much better than the market return of around 29% (not including dividends) in the same period. So that should have shareholders smiling. We'll need to follow Observe Medical for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

Since the stock has added kr93m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Observe Medical

Observe Medical 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last twelve months, Observe Medical's revenue grew by 17,076%. That's well above most other pre-profit companies. While the share price gain of 94% over twelve months is pretty tasty, you might argue it doesn't fully reflect the strong revenue growth. So quite frankly it could be a good time to investigate Observe Medical in some detail. Since we evolved from monkeys, we think in linear terms by nature. So if growth goes exponential, opportunity may exist for the enlightened.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
OB:OBSRV Earnings and Revenue Growth November 17th 2021

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Observe Medical boasts a total shareholder return of 94% for the last year. A substantial portion of that gain has come in the last three months, with the stock up 47% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It's always interesting to track share price performance over the longer term. But to understand Observe Medical better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Observe Medical (including 1 which is significant) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.

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