Is Party City Holdco's (NYSE:PRTY) Share Price Gain Of 184% Well Earned?

Unfortunately, investing is risky - companies can and do go bankrupt. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Party City Holdco Inc. (NYSE:PRTY) share price has soared 184% in the last year. Most would be very happy with that, especially in just one year! Also pleasing for shareholders was the 106% gain in the last three months. Unfortunately the longer term returns are not so good, with the stock falling 55% in the last three years.

Check out our latest analysis for Party City Holdco

Party City Holdco 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last year Party City Holdco saw its revenue shrink by 20%. So we would not have expected the share price to rise 184%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Party City Holdco in this interactive graph of future profit estimates.

A Different Perspective

It's good to see that Party City Holdco has rewarded shareholders with a total shareholder return of 184% in the last twelve months. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Even so, be aware that Party City Holdco is showing 3 warning signs in our investment analysis , you should know about...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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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