Is ReTo Eco-Solutions' (NASDAQ:RETO) 177% Share Price Increase Well Justified?

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the ReTo Eco-Solutions, Inc. (NASDAQ:RETO) share price has soared 177% return in just a single year. Shareholders are also celebrating an even better 284% rise, over the last three months. Unfortunately the longer term returns are not so good, with the stock falling 76% in the last three years.

View our latest analysis for ReTo Eco-Solutions

ReTo Eco-Solutions isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year ReTo Eco-Solutions saw its revenue shrink by 24%. So we would not have expected the share price to rise 177%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.

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

Take a more thorough look at ReTo Eco-Solutions' financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that ReTo Eco-Solutions rewarded shareholders with a total shareholder return of 177% over the last year. That certainly beats the loss of about 21% per year over three years. It could well be that the business has turned around -- or else regained the confidence of investors. 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 - ReTo Eco-Solutions has 5 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Of course ReTo Eco-Solutions may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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