If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the Transphorm, Inc. (NASDAQ:TGAN) share price is 58% higher than it was a year ago, much better than the market decline of around 4.3% (not including dividends) in the same period. So that should have shareholders smiling. Transphorm hasn't been listed for long, so it's still not clear if it is a long term winner.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Transphorm
Given that Transphorm 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Transphorm grew its revenue by 63% last year. That's a head and shoulders above most loss-making companies. The solid 58% share price gain goes down pretty well, but it's not necessarily as good as you might expect given the top notch revenue growth. So quite frankly it could be a good time to investigate Transphorm in some detail. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Transphorm
A Different Perspective
Transphorm boasts a total shareholder return of 58% for the last year. The more recent returns haven't been as impressive as the longer term returns, coming in at just 9.1%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). It's always interesting to track share price performance over the longer term. But to understand Transphorm better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Transphorm you should be aware of.
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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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.
