It certainly might concern Applied Optoelectronics, Inc. (NASDAQ:AAOI) shareholders to see the share price down 31% in just 30 days. But that doesn't detract from the splendid returns of the last year. We're very pleased to report the share price shot up 204% in that time. So some might not be surprised to see the price retrace some. Only time will tell if there is still too much optimism currently reflected in the share price.
Since the long term performance has been good but there's been a recent pullback of 19%, let's check if the fundamentals match the share price.
See our latest analysis for Applied Optoelectronics
Applied Optoelectronics wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Applied Optoelectronics saw its revenue grow by 0.3%. That's not great considering the company is losing money. So we wouldn't have expected the share price to rise by 204%. We're happy that investors have made money, though we wonder if the increase will be sustained. It's quite likely that the market is considering other factors, not just revenue growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's nice to see that Applied Optoelectronics shareholders have received a total shareholder return of 204% over the last year. That certainly beats the loss of about 10% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Even so, be aware that Applied Optoelectronics is showing 4 warning signs in our investment analysis , and 1 of those is concerning...
Applied Optoelectronics 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 American 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.