If You Had Bought FAT Brands (NASDAQ:FAT) Stock A Year Ago, You Could Pocket A 54% Gain Today

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the FAT Brands Inc. (NASDAQ:FAT) share price is up 54% in the last year, clearly besting the market return of around 22% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 3.2% in three years.

See our latest analysis for FAT Brands

FAT Brands 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.

FAT Brands actually shrunk its revenue over the last year, with a reduction of 22%. The stock is up 54% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for FAT Brands in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that FAT Brands rewarded shareholders with a total shareholder return of 54% over the last year. That gain actually surpasses the 0.6% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting FAT Brands on your watchlist. 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 - FAT Brands has 3 warning signs we think you should be aware of.

FAT Brands is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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