It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For instance the Score Media and Gaming Inc. (CVE:SCR) share price is 180% higher than it was three years ago. Most would be happy with that. In the last week shares have slid back 11%.
See our latest analysis for Score Media and Gaming
Given that Score Media and Gaming 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Score Media and Gaming’s revenue trended up 6.5% each year over three years. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In comparison, the share price rise of 41% per year over the last three years is pretty impressive. We’d need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It seems likely that the market is pretty optimistic about Score Media and Gaming, given it is losing money.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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 Score Media and Gaming in this interactive graph of future profit estimates.
A Different Perspective
It’s good to see that Score Media and Gaming has rewarded shareholders with a total shareholder return of 77% in the last twelve months. That certainly beats the loss of about 0.6% 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Score Media and Gaming (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
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 CA 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.
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