The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Zynga Inc. (NASDAQ:ZNGA) share price has soared 240% in the last half decade. Most would be very happy with that. The last week saw the share price soften some 7.0%.
Zynga isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 5 years Zynga saw its revenue grow at 15% per year. That's a fairly respectable growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 28% per year over in that time. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Zynga is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
We're pleased to report that Zynga shareholders have received a total shareholder return of 44% over one year. That's better than the annualised return of 28% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that Zynga is showing 1 warning sign in our investment analysis , you should know about...
But note: Zynga 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.
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