Investors ignore increasing losses at Establishment Labs Holdings (NASDAQ:ESTA) as stock jumps 6.2% this past week

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. Long term Establishment Labs Holdings Inc. (NASDAQ:ESTA) shareholders would be well aware of this, since the stock is up 144% in five years. In the last week the share price is up 6.2%.

Since the stock has added US$73m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Establishment Labs Holdings

Establishment Labs Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Establishment Labs Holdings can boast revenue growth at a rate of 17% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 20% per year, in that time. This suggests the market has well and truly recognized the progress the business has made. Establishment Labs Holdings seems like a high growth stock - so growth investors might want to add it to their watchlist.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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 Establishment Labs Holdings in this interactive graph of future profit estimates.

A Different Perspective

Establishment Labs Holdings provided a TSR of 36% over the year. That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 20% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. Take risks, for example - Establishment Labs Holdings has 3 warning signs we think you should be aware of.

Establishment Labs Holdings is not the only stock that insiders are buying. For those who like to find lesser know companies 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 American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.