January 20, 2022

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Is Purple Innovation’s (NASDAQ:PRPL) 108% Share Price Increase Well Justified?

Purple Innovation, Inc. (NASDAQ:PRPL) shareholders might be concerned after seeing the share price drop 11% in the last month. On the other hand, over the last twelve months the stock has delivered rather impressive returns. Indeed, the share price is up an impressive 108% in that time. So we think most shareholders won’t be too upset about the recent fall. Only time will tell if there is still too much optimism currently reflected in the share price.

View our latest analysis for Purple Innovation

Given that Purple Innovation didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. 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, Purple Innovation’s revenue grew by 41%. That’s a fairly respectable growth rate. While that revenue growth is pretty good the share price performance outshone it, with a lift of 108% as mentioned above. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. Of course, we are always cautious about succumbing to ‘fear of missing out’ when a stock has shot up strongly.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqCM:PRPL Income Statement, March 10th 2020

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. You can see what analysts are predicting for Purple Innovation in this interactive graph of future profit estimates.

A Different Perspective

It’s nice to see that Purple Innovation shareholders have gained 108% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 50% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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. Take risks, for example – Purple Innovation has 1 warning sign we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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 US exchanges.

If you spot an error that warrants correction, please contact the editor at [email protected] 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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