Youdao (NYSE:DAO) Shareholders Booked A 37% Gain In The Last Year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Youdao, Inc. (NYSE:DAO) share price is up 37% in the last year, clearly besting the market return of around 28% (not including dividends). That's a solid performance by our standards! Youdao hasn't been listed for long, so it's still not clear if it is a long term winner.

Check out our latest analysis for Youdao

Because Youdao 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last year Youdao saw its revenue grow by 119%. That's a head and shoulders above most loss-making companies. The solid 37% share price gain goes down pretty well, but it's not necessarily as good as you might expect given the top notch revenue growth. If that's the case, now might be the time to take a close look at Youdao. Since we evolved from monkeys, we think in linear terms by nature. So if growth goes exponential, opportunity may exist for the enlightened.

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

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

A Different Perspective

Youdao boasts a total shareholder return of 37% for the last year. A substantial portion of that gain has come in the last three months, with the stock up 16% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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 5 warning signs with Youdao (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

We will like Youdao 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 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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