Can You Imagine How Jubilant DAVIDsTEA's (NASDAQ:DTEA) Shareholders Feel About Its 182% Share Price Gain?

By
Simply Wall St
Published
February 02, 2021
NasdaqGM:DTEA

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 DAVIDsTEA Inc. (NASDAQ:DTEA) share price has soared 182% in the last year. Most would be very happy with that, especially in just one year! Shareholders are also celebrating an even better 270% rise, over the last three months. The longer term returns have not been as good, with the stock price only 5.3% higher than it was three years ago.

Check out our latest analysis for DAVIDsTEA

DAVIDsTEA isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year DAVIDsTEA saw its revenue shrink by 25%. So we would not have expected the share price to rise 182%. 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.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
NasdaqGM:DTEA Earnings and Revenue Growth February 2nd 2021

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that DAVIDsTEA has rewarded shareholders with a total shareholder return of 182% in the last twelve months. That certainly beats the loss of about 9% 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 2 warning signs for DAVIDsTEA (1 is concerning!) that you should be aware of before investing here.

But note: DAVIDsTEA 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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