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For us, stock picking is in large part the hunt for the truly magnificent stocks. Not every pick can be a winner, but when you pick the right stock, you can win big. One such superstar is Pacific Edge Limited (NZSE:PEB), which saw its share price soar 351% in three years. Also pleasing for shareholders was the 19% gain in the last three months.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Given that Pacific Edge 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years Pacific Edge has grown its revenue at 18% annually. That's a very respectable growth rate. Arguably the very strong share price gain of 65% a year is very generous when compared to the revenue growth. After a price rise like that many will have the business, and plenty of them will be wondering whether the price moved too high, too fast.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We've already covered Pacific Edge's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Pacific Edge hasn't been paying dividends, but its TSR of 381% exceeds its share price return of 351%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that Pacific Edge has rewarded shareholders with a total shareholder return of 122% in the last twelve months. That gain is better than the annual TSR over five years, which is 26%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
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 NZ 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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