The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Zynga Inc. (NASDAQ:ZNGA) share price is 133% higher than it was three years ago. How nice for those who held the stock! It's also good to see the share price up 20% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
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Given that Zynga 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 3 years Zynga saw its revenue grow at 8.9% per year. That's a very respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 33% per year over three years. It's hard to value pre-profit businesses, but it seems like the market has become a lot more optimistic about this one! Some investors like to buy in just after a company becomes profitable, since that can be a powerful inflexion point.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Zynga is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Zynga stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's good to see that Zynga has rewarded shareholders with a total shareholder return of 45% in the last twelve months. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you are like me, then you will 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.
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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.