Leaf Group's (NYSE:LEAF) Wonderful 369% Share Price Increase Shows How Capitalism Can Build Wealth

By
Simply Wall St
Published
May 18, 2021
Source: Shutterstock

While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, Leaf Group Ltd. (NYSE:LEAF) has generated a beautiful 369% return in just a single year. On top of that, the share price is up 25% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. On the other hand, longer term shareholders have had a tougher run, with the stock falling 16% in three years.

View our latest analysis for Leaf Group

Leaf Group wasn't profitable in the last twelve months, 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. 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 Leaf Group saw its revenue grow by 50%. That's a head and shoulders above most loss-making companies. But the share price seems headed to the moon, up 369% as previously highlighted. Despite the strong growth, it's certainly possible the market has gotten a little over-excited. So this looks like a great watchlist candidate for investors who look for high growth inflexion points.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NYSE:LEAF Earnings and Revenue Growth May 19th 2021

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's good to see that Leaf Group has rewarded shareholders with a total shareholder return of 369% in the last twelve months. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 Leaf Group that you should be aware of before investing here.

But note: Leaf Group 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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