We think that it’s fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. Take, for example, the Luna Innovations Incorporated (NASDAQ:LUNA) share price, which skyrocketed 302% over three years. On top of that, the share price is up 26% in about a quarter. This could be related to the recent financial results, released recently – you can catch up on the most recent data by reading our company report.
We don’t think that Luna Innovations’s modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. As a general rule, if the market is looking past earnings to focus on revenue, there is a hope for, or expectation of, strong growth. As you can imagine, it’s easy to imagine a fast growing company becoming (potentially very) profitable, but when revenue growth slows, then the potential upside often seems less impressive.
Over the last three years Luna Innovations has grown its revenue at 0.8% annually. That’s not a very high growth rate considering it doesn’t make profits. So we’re surprised that the share price has soared by 59% each year over that time. We’ll tip our hats to that, any day, but the top-line growth isn’t particularly impressive when you compare it to other pre-profit companies. The company will need to continue to execute on its business strategy to justify this rise.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We know that Luna Innovations has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Luna Innovations stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It’s nice to see that Luna Innovations shareholders have received a total shareholder return of 51% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 19% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You could get a better understanding of Luna Innovations’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.