One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Ergomed plc (LON:ERGO), which is up 66%, over three years, soundly beating the market return of 13% (not including dividends).
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Given that Ergomed 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 3 years Ergomed saw its revenue grow at 21% per year. That's well above most pre-profit companies. While the compound gain of 18% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Ergomed on your radar. If the company is trending towards profitability then it could be very interesting.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Ergomed's financial health with this free report on its balance sheet.
A Different Perspective
The last twelve months weren't great for Ergomed shares, which performed worse than the market, costing holders 8.3%. Meanwhile, the broader market slid about 1.5%, likely weighing on the stock. Investors are up over three years, booking 18% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. You could get a better understanding of Ergomed's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.