Stock Analysis

Investors Who Bought Ferroglobe (NASDAQ:GSM) Shares A Year Ago Are Now Up 691%

  •  Updated
NasdaqCM:GSM
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While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When an investor finds a multi-bagger (a stock that goes up over 200%), it makes a big difference to their portfolio. For example, Ferroglobe PLC (NASDAQ:GSM) has generated a beautiful 691% return in just a single year. It's also good to see the share price up 124% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Zooming out, the stock is actually down 77% in the last three years.

We love happy stories like this one. The company should be really proud of that performance!

See our latest analysis for Ferroglobe

Because Ferroglobe 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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.

Ferroglobe actually shrunk its revenue over the last year, with a reduction of 29%. So it's very confusing to see that the share price gained a whopping 691%. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. To us, a gain like this looks like speculation, but there might be historical trends to back it up.

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
NasdaqCM:GSM Earnings and Revenue Growth March 13th 2021

Take a more thorough look at Ferroglobe's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Ferroglobe has rewarded shareholders with a total shareholder return of 691% in the last twelve months. That certainly beats the loss of about 10% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 Ferroglobe (including 1 which is significant) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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What are the risks and opportunities for Ferroglobe?

Ferroglobe PLC operates in the silicon and specialty metals industry in the United States, Europe, and internationally.

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Rewards

  • Trading at 44.5% below our estimate of its fair value

  • Became profitable this year

Risks

  • Earnings are forecast to decline by an average of 68.6% per year for the next 3 years

  • High level of non-cash earnings

View all Risks and Rewards

Share Price

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1Y Return

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