Investors ignore increasing losses at Applied Optoelectronics (NASDAQ:AAOI) as stock jumps 37% this past week

Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. Take, for example Applied Optoelectronics, Inc. (NASDAQ:AAOI). Its share price is already up an impressive 282% in the last twelve months. Meanwhile the share price is 37% higher than it was a week ago. Zooming out, the stock is actually down 45% in the last three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Applied Optoelectronics

Because Applied Optoelectronics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Applied Optoelectronics grew its revenue by 4.4% last year. That's not great considering the company is losing money. So we wouldn't have expected the share price to rise by 282%. The business will need a lot more growth to justify that increase. It's quite likely that the market is considering other factors, not just revenue growth.

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

This free interactive report on Applied Optoelectronics' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Applied Optoelectronics shareholders have received a total shareholder return of 282% over one year. That certainly beats the loss of about 13% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Take risks, for example - Applied Optoelectronics has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.