Yahoo Finance Investing in Omega Diagnostics Group (LON:ODX) three years ago would have delivered you a 230% gain
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Omega Diagnostics Group PLC (LON:ODX) share price has flown 226% in the last three years. Most would be happy with that.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Omega Diagnostics Group
Because Omega Diagnostics Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years Omega Diagnostics Group has grown its revenue at 2.9% annually. That's not a very high growth rate considering it doesn't make profits. In comparison, the share price rise of 48% per year over the last three years is pretty impressive. We'd need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It seems likely that the market is pretty optimistic about Omega Diagnostics Group, given it is losing money.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Omega Diagnostics Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Omega Diagnostics Group's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Omega Diagnostics Group hasn't been paying dividends, but its TSR of 230% exceeds its share price return of 226%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market gained around 30% in the last year, Omega Diagnostics Group shareholders lost 35%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 25%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 - Omega Diagnostics Group has 3 warning signs (and 2 which are potentially serious) we think you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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.
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