Midsummer (STO:MIDS) soars 11% this week, taking one-year gains to 149%

Unfortunately, investing is risky - companies can and do go bankrupt. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Midsummer AB (publ) (STO:MIDS) share price has soared 149% return in just a single year. It's up an even more impressive 149% over the last quarter. Unfortunately the longer term returns are not so good, with the stock falling 73% in the last three years.

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.

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Midsummer 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last twelve months, Midsummer's revenue grew by 112%. That's a head and shoulders above most loss-making companies. Meanwhile, the market has paid attention, sending the share price soaring 149% in response. That sort of revenue growth is bound to attract attention, even if the company doesn't turn a profit. The strong share price rise indicates optimism, so there may be a better opportunity for buyers as the hype fades a bit.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

It's good to see that Midsummer has rewarded shareholders with a total shareholder return of 149% in the last twelve months. Notably the five-year annualised TSR loss of 12% per year compares very unfavourably with the recent share price performance. 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. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Midsummer (of which 2 shouldn't be ignored!) you should know about.

We will like Midsummer better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Swedish 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.