The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Little Green Pharma Ltd (ASX:LGP) share price has soared 145% return in just a single year. Also pleasing for shareholders was the 24% gain in the last three months. Little Green Pharma hasn’t been listed for long, so it’s still not clear if it is a long term winner.
Because Little Green Pharma 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. 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 twelve months, Little Green Pharma’s revenue grew by 457%. That’s a head and shoulders above most loss-making companies. And the share price has responded, gaining 145% as we previously mentioned. That sort of revenue growth is bound to attract attention, even if the company doesn’t turn a profit. Given the positive sentiment around the stock we’re cautious, but there’s no doubt its worth watching.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Little Green Pharma stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Little Green Pharma shareholders should be happy with the total gain of 145% over the last twelve months. The more recent returns haven’t been as impressive as the longer term returns, coming in at just 24%. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Little Green Pharma (of which 1 is concerning!) you should know about.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you decide to trade Little Green Pharma, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.