Investors bid One Stop Systems (NASDAQ:OSS) up US$6.5m despite increasing losses YoY, taking five-year CAGR to 8.8%

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But One Stop Systems, Inc. (NASDAQ:OSS) has fallen short of that second goal, with a share price rise of 52% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 36% in the last year.

Since the stock has added US$6.5m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for One Stop Systems

Given that One Stop Systems 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last 5 years One Stop Systems saw its revenue grow at 2.0% per year. That's not a very high growth rate considering the bottom line. Like its revenue, its share price gained over the period. The increase of 9% per year probably reflects the modest revenue growth. If profitability is likely in the near term, then this might be one to add to your watchlist.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling One Stop Systems stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

One Stop Systems' TSR for the year was broadly in line with the market average, at 36%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 9%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. To that end, you should be aware of the 4 warning signs we've spotted with One Stop Systems .

For those who like to find winning investments this free list of undervalued 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.