The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) share price is 59% higher than it was a year ago, much better than the market return of around 19% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Looking back further, the stock price is 43% higher than it was three years ago.
KalVista Pharmaceuticals isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
KalVista Pharmaceuticals actually shrunk its revenue over the last year, with a reduction of 41%. Despite the lack of revenue growth, the stock has returned a solid 59% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at KalVista Pharmaceuticals' financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that KalVista Pharmaceuticals rewarded shareholders with a total shareholder return of 59% over the last year. That gain actually surpasses the 13% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with KalVista Pharmaceuticals , and understanding them should be part of your investment process.
But note: KalVista Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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