For us, stock picking is in large part the hunt for the truly magnificent stocks. But when you hold the right stock for the right time period, the rewards can be truly huge. For example, the International Genius Company (HKG:33) share price is up a whopping 301% in the last three years, a handsome return for long term holders. It's also up 51% in about a month.
The past week has proven to be lucrative for International Genius investors, so let's see if fundamentals drove the company's three-year performance.
International Genius isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good 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.
International Genius' revenue trended up 12% each year over three years. That's a very respectable growth rate. Arguably the very strong share price gain of 59% a year is very generous when compared to the revenue growth. A hot stock like this is usually well worth taking a closer look at, as long as you don't let the fear of missing out (FOMO) impact your thinking.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on International Genius' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 3.3% in the twelve months, International Genius shareholders did even worse, losing 36%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 20% per year over half a decade. 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 - International Genius has 2 warning signs (and 1 which is potentially serious) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.
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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com