Is Etherstack's (ASX:ESK) Share Price Gain Of 258% Well Earned?
While Etherstack plc (ASX:ESK) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 16% in the last quarter. But that doesn't change the fact that the returns over the last three years have been very strong. In three years the stock price has launched 258% higher: a great result. After a run like that some may not be surprised to see prices moderate. Only time will tell if there is still too much optimism currently reflected in the share price.
Check out our latest analysis for Etherstack
Etherstack isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 3 years Etherstack saw its revenue grow at 0.2% per year. That's not a very high growth rate considering it doesn't make profits. In contrast, the stock has popped 53% per year in that time - an impressive result. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It seems likely that the market is pretty optimistic about Etherstack, given it is losing money.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Etherstack's financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Etherstack has rewarded shareholders with a total shareholder return of 153% in the last twelve months. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Etherstack 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 AU exchanges.
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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