Is Twin Disc's (NASDAQ:TWIN) 138% Share Price Increase Well Justified?

By
Simply Wall St
Published
June 14, 2021
NasdaqGS:TWIN

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the Twin Disc, Incorporated (NASDAQ:TWIN) share price has soared 138% in the last year. Most would be very happy with that, especially in just one year! Also pleasing for shareholders was the 47% gain in the last three months. In contrast, the longer term returns are negative, since the share price is 46% lower than it was three years ago.

View our latest analysis for Twin Disc

Because Twin Disc made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 year Twin Disc saw its revenue shrink by 19%. We're a little surprised to see the share price pop 138% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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
NasdaqGS:TWIN Earnings and Revenue Growth June 14th 2021

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

A Different Perspective

It's nice to see that Twin Disc shareholders have received a total shareholder return of 138% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 7% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. Take risks, for example - Twin Disc has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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