Is Lily Textile's (TPE:1443) Share Price Gain Of 111% Well Earned?

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Lily Textile Co., Ltd. (TPE:1443) stock is up an impressive 111% over the last five years. Also pleasing for shareholders was the 25% gain in the last three months. But this could be related to the strong market, which is up 23% in the last three months.

See our latest analysis for Lily Textile

Given that Lily Textile 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Lily Textile saw its revenue shrink by 13% per year. Given that scenario, we wouldn't have expected the share price to rise 16% per year, but that's what it did. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, this situation makes us a little wary of the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Lily Textile provided a TSR of 18% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade This suggests the company might be improving over time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Lily Textile (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

We will like Lily Textile 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 TW exchanges.

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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. 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.
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