April 23, 2024
Investments

Investing in Purple Group (JSE:PPE) five years ago would have delivered you a 148% gain


When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term Purple Group Limited (JSE:PPE) shareholders would be well aware of this, since the stock is up 143% in five years. Meanwhile the share price is 3.0% higher than it was a week ago.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Purple Group

Purple Group isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Purple Group can boast revenue growth at a rate of 29% per year. That’s well above most pre-profit companies. So it’s not entirely surprising that the share price reflected this performance by increasing at a rate of 19% per year, in that time. This suggests the market has well and truly recognized the progress the business has made. Purple Group seems like a high growth stock – so growth investors might want to add it to their watchlist.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growthearnings-and-revenue-growth

earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Purple Group’s earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We’ve already covered Purple Group’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Purple Group’s TSR of 148% over the last 5 years is better than the share price return.

A Different Perspective

While the broader market gained around 1.4% in the last year, Purple Group shareholders lost 49%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. It’s always interesting to track share price performance over the longer term. But to understand Purple Group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Purple Group you should know about.

Purple Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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