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We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. For example, the Novonix Limited (ASX:NVX) share price is up a whopping 511% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. In the last week shares have slid back 2.3%.
It really delights us to see such great share price performance for investors.
Novonix isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
In the last 5 years Novonix saw its revenue grow at 56% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 44%(per year) over the same period. Despite the strong run, top performers like Novonix have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Novonix
A Different Perspective
We're pleased to report that Novonix shareholders have received a total shareholder return of 117% over one year. That's better than the annualised return of 44% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Novonix (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
Novonix is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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. 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.
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