Investors in Ebiquity (LON:EBQ) have seen favorable returns of 60% over the past three years

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Ebiquity plc (LON:EBQ) share price is up 60% in the last three years, clearly besting the market return of around 7.1% (not including dividends).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Ebiquity

Because Ebiquity made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Ebiquity's revenue trended up 5.3% each year over three years. That's not a very high growth rate considering it doesn't make profits. In that time the share price is up 17% per year, which is not unreasonable given the revenue gorwth. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth

This free interactive report on Ebiquity's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 2.4% in the last year, Ebiquity shareholders lost 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 2 warning signs for Ebiquity that you should be aware of before investing here.

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 British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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