The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. no longer than double your money. For example the Optiscan Imaging Limited (ASX: OIL) the share price is 300% higher than it was three years ago. Most would be happy with this. In the last week, the share price has increased by 40%.
Since it’s been a strong week for Optiscan Imaging shareholders, let’s look at a longer-term fundamentals trend.
See our latest review for Optiscan Imaging
Optiscan Imaging was not profitable in the last twelve months, it is unlikely that we will see a strong correlation between its share price and its earnings per share (EPS). Entry is probably our next best option. Shareholders of non-profit companies usually expect strong revenue growth. It is because it is difficult to be convinced that a company will be sustainable if the growth of income is insignificant, and it never has a profit.
In the last 3 years Optiscan Imaging has seen its revenues grow at 22% annually. That’s a lot better than most loss-making businesses. Along the way, the stock price has gained 59% annually, a solid pop by our standards. But the market seems to be paying attention to strong revenue growth. However, we will say that Optiscan Imaging is still worth investigating – successful businesses can often continue to grow for long periods.
You can see how earnings and revenues have changed over time in the image below (click on the graph to see the exact values).
We like that insiders have bought shares in the last twelve months. Even so, future earnings will be far more important than whether current stocks are making money. It might be worth taking a look at ours free Optiscan Imaging’s earnings, revenue and cash flow report.
A different perspective
Investors in Optiscan Imaging had a tough year, with a total loss of 18%, against a market gain of around 1.2%. Even the share prices of good stocks fall sometimes, but we want to see improvements in the fundamental metrics of a business, before we get too interested. Long-term investors wouldn’t be so upset, since they would have made 7%, annually, over five years. It could be that the recent selloff is an opportunity, so it’s worth checking the fundamentals for signs of a long-term upward trend. While it is worth considering the different impacts that market conditions can have on the stock price, there are other factors that are even more important. Take risks, for example – Optiscan Imaging has 5 warning signs (and 3 that are a bit unpleasant) we think you should know.
There are many other companies that have insiders buy shares. You probably do no I want to miss this free list of growing companies that insiders buy.
Please note, the market returns quoted in this article reflect the weighted average market returns of stocks currently trading on AU exchanges.
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This Simply Wall St article 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 into account your goals, or your financial situation. We aim to deliver focused long-term analysis driven by fundamental data. Note that our analysis can not factor in the latest announcements of companies sensitive to price or quality material. Simply Wall St has no position in any of the stocks mentioned.
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