Unless you borrow money to invest, the potential losses are limited. But if you pick the right stock, you can make a lot more than 100%. Take, for example Travelzoo (NASDAQ:TZOO). Its share price is already up an impressive 216% in the last twelve months. On top of that, the share price is up 55% in about a quarter. It is also impressive that the stock is up 123% over three years, adding to the sense that it is a real winner.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Travelzoo saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. It may be that the company has done well on other metrics.
Travelzoo's revenue actually dropped 32% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Travelzoo stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's good to see that Travelzoo has rewarded shareholders with a total shareholder return of 216% in the last twelve months. That's better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Travelzoo better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Travelzoo you should be aware of.
Travelzoo is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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