Applied Optoelectronics, Inc. (NASDAQ:AAOI) shareholders have seen the share price descend 20% over the month. But that cannot eclipse the spectacular share price rise we've seen over the last twelve months. In fact, it is up 616% in that time. So we wouldn't blame sellers for taking some profits. While winners often keep winning, it can pay to be cautious after a strong rise. Anyone who held for that rewarding ride would probably be keen to talk about it.
In light of the stock dropping 14% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
View our latest analysis for Applied Optoelectronics
Because Applied Optoelectronics 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. 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 year Applied Optoelectronics saw its revenue grow by 1.5%. That's not a very high growth rate considering it doesn't make profits. So it's truly surprising that the share price rocketed 616% in a single year. We're happy that investors have made money, but we can't help questioning whether the rise is sustainable. This is an example of the huge profits some lucky shareholders occasionally make on growth stocks.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
NasdaqGM:AAOI Earnings and Revenue Growth January 15th 2024
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's nice to see that Applied Optoelectronics shareholders have received a total shareholder return of 616% over the last year. That gain is better than the annual TSR over five years, which is 1.0%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 risks, for instance. Every company has them, and we've spotted 2 warning signs for Applied Optoelectronics you should know about.
Applied Optoelectronics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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