Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Westrock Coffee Company, LLC (NASDAQ:WEST) share price is up 34% in the last 1 year, clearly besting the market decline of around 25% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Westrock Coffee Company hasn't been listed for long, so it's still not clear if it is a long term winner.
Since the stock has added US$86m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for Westrock Coffee Company
Westrock Coffee Company 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.
Westrock Coffee Company grew its revenue by 26% last year. We respect that sort of growth, no doubt. Buyers pushed the share price 34% in response, which isn't unreasonable. If revenue stays on trend, there may be plenty more share price gains to come. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
NasdaqGM:WEST Earnings and Revenue Growth December 29th 2022
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Westrock Coffee Company in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that Westrock Coffee Company shareholders have gained 34% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 26% in that time. This suggests the company is continuing to win over new investors. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Westrock Coffee Company has 1 warning sign we think you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do 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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