If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Nuance Communications, Inc. (NASDAQ:NUAN) share price is up 14% in the last year, clearly besting than the market return of around 7.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 10% in the last three years.
Given that Nuance Communications didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. 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.
Nuance Communications grew its revenue by 10% last year. That’s not great considering the company is losing money. In keeping with the revenue growth, the share price gained 14% in that time. That’s not a standout result, but it is solid – much like the level of revenue growth. It could be worth keeping an eye on this one, especially if growth accelerates.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It’s good to see that Nuance Communications has rewarded shareholders with a total shareholder return of 14% in the last twelve months. That’s better than the annualised return of 1.2% 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. Before spending more time on Nuance Communications it might be wise to click here to see if insiders have been buying or selling shares.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.