Investors in Covalon Technologies (CVE:COV) have made a impressive return of 145% over the past year

Unfortunately, investing is risky - companies can and do go bankrupt. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Covalon Technologies Ltd. (CVE:COV) share price has soared 145% in the last 1 year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 26% over the last quarter. In contrast, the longer term returns are negative, since the share price is 60% lower than it was three years ago.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Covalon Technologies

Because Covalon Technologies 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Covalon Technologies grew its revenue by 3.8% last year. That's not great considering the company is losing money. In contrast, the share price took off during the year, gaining 145%. The business will need a lot more growth to justify that increase. It's quite likely that the market is considering other factors, not just revenue growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that Covalon Technologies has rewarded shareholders with a total shareholder return of 145% in the last twelve months. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 - Covalon Technologies has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Covalon Technologies is not the only stock that insiders are buying. 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 CA 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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