For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. For example, the Codexis, Inc. (NASDAQ:CDXS) share price is up a whopping 305% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. And in the last week the share price has popped 8.9%. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Codexis 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 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 5 years Codexis saw its revenue grow at 11% per year. That’s a pretty good long term growth rate. Arguably it’s more than reflected in the very strong share price gain of 32% a year over a half a decade. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Codexis stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Codexis shareholders are down 6.5% for the year, but the market itself is up 20%. 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. Longer term investors wouldn’t be so upset, since they would have made 32%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Codexis may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.