When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the PowerFleet, Inc. (NASDAQ:AIOT) share price has soared 112% return in just a single year. Also pleasing for shareholders was the 33% gain in the last three months. Also impressive, the stock is up 35% over three years, making long term shareholders happy, too.
In light of the stock dropping 6.2% 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.
PowerFleet wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last year PowerFleet saw its revenue grow by 67%. That's a head and shoulders above most loss-making companies. Meanwhile, the market has paid attention, sending the share price soaring 112% in response. That sort of revenue growth is bound to attract attention, even if the company doesn't turn a profit. Given the positive sentiment around the stock we're cautious, but there's no doubt its worth watching.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. If you are thinking of buying or selling PowerFleet stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's good to see that PowerFleet has rewarded shareholders with a total shareholder return of 112% in the last twelve months. That gain is better than the annual TSR over five years, which is 0.5%. 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. Case in point: We've spotted 3 warning signs for PowerFleet you should be aware of, and 1 of them can't be ignored.
PowerFleet is not the only stock that insiders are buying. For those who like to find lesser know companies 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.
