Shareholders have faith in loss-making ReTo Eco-Solutions (NASDAQ:RETO) as stock climbs 53% in past week, taking one-year gain to 117%

Simply Wall St
January 20, 2022
Source: Shutterstock

Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the ReTo Eco-Solutions, Inc. (NASDAQ:RETO) share price has soared 117% in the last 1 year. Most would be very happy with that, especially in just one year! Shareholders are also celebrating an even better 152% rise, over the last three months. Unfortunately the longer term returns are not so good, with the stock falling 11% in the last three years.

The past week has proven to be lucrative for ReTo Eco-Solutions investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for ReTo Eco-Solutions

ReTo Eco-Solutions 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. When a company doesn't make profits, we'd generally expect to see good 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.

ReTo Eco-Solutions actually shrunk its revenue over the last year, with a reduction of 52%. So we would not have expected the share price to rise 117%. It just goes to show the market doesn't always pay attention to the reported numbers. It's quite likely the revenue fall was already priced in, anyway.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqCM:RETO Earnings and Revenue Growth January 20th 2022

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

A Different Perspective

Pleasingly, ReTo Eco-Solutions' total shareholder return last year was 117%. This recent result is much better than the 4% drop suffered by shareholders each year (on average) over the last three. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. 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. For instance, we've identified 4 warning signs for ReTo Eco-Solutions (1 is a bit unpleasant) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.