Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Nova LifeStyle, Inc. (NASDAQ:NVFY) share price had more than doubled in just one year – up 235%. Better yet, the share price has gained 261% in the last quarter. This could be related to the recent financial results, released recently – you can catch up on the most recent data by reading our company report. Having said that, the longer term returns aren’t so impressive, with stock gaining just 19% in three years.
Since it’s been a strong week for Nova LifeStyle shareholders, let’s have a look at trend of the longer term fundamentals.
Because Nova LifeStyle 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Nova LifeStyle actually shrunk its revenue over the last year, with a reduction of 0.01%. We’re a little surprised to see the share price pop 235% in the last year. It just goes to show the market doesn’t always pay attention to the reported numbers. It’s quite likely the revenue fall was already priced in, anyway.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Nova LifeStyle stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We’re pleased to report that Nova LifeStyle shareholders have received a total shareholder return of 235% over one year. That certainly beats the loss of about 7% 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. For instance, we’ve identified 3 warning signs for Nova LifeStyle (2 shouldn’t be ignored) that you should be aware of.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Valuation is complex, but we’re here to simplify it.
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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.