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If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Cardlytics, Inc. (NASDAQ:CDLX) share price is up 11% in the last year, clearly besting than the market return of around 1.5% (not including dividends). So that should have shareholders smiling. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
Cardlytics isn’t a profitable company, so 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. 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 does expect good top-line growth.
Over the last twelve months, Cardlytics’s revenue grew by 13%. That’s not great considering the company is losing money. In keeping with the revenue growth, the share price gained 11% in that time. While not a huge gain tht seems pretty reasonable. Given the market doesn’t seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
This free interactive report on Cardlytics’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Cardlytics shareholders should be happy with the total gain of 11% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 34% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.