While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. While not every stock performs well, when investors win, they can win big. In the case of China Green Agriculture, Inc. (NYSE:CGA), the share price is up an incredible 401% in the last year alone. It's also good to see the share price up 230% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Unfortunately the longer term returns are not so good, with the stock falling 15% in the last three years.
Given that China Green Agriculture didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year China Green Agriculture saw its revenue shrink by 7.9%. So it's very confusing to see that the share price gained a whopping 401%. 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).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that China Green Agriculture shareholders have received a total shareholder return of 401% over the last year. That certainly beats the loss of about 6% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. For example, we've discovered 4 warning signs for China Green Agriculture (2 shouldn't be ignored!) that you should be aware of before investing here.
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.
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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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