Did The Underlying Business Drive Andes Technology's (TPE:6533) Lovely 672% Share Price Gain?

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Andes Technology Corporation (TPE:6533) shares for the last five years, while they gained 672%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 60% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

It really delights us to see such great share price performance for investors.

See our latest analysis for Andes Technology

While Andes Technology made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Andes Technology saw its revenue grow at 22% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 50% per year in that time. Despite the strong run, top performers like Andes Technology have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Andes Technology has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Andes Technology will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Andes Technology the TSR over the last 5 years was 677%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Andes Technology shareholders have received a total shareholder return of 348% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 51% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should learn about the 2 warning signs we've spotted with Andes Technology (including 1 which shouldn't be ignored) .

Of course Andes Technology may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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