Investors bid LightPath Technologies (NASDAQ:LPTH) up US$5.1m despite increasing losses YoY, taking three-year CAGR to 37%

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For instance the LightPath Technologies, Inc. (NASDAQ:LPTH) share price is 154% higher than it was three years ago. That sort of return is as solid as granite. Meanwhile the share price is 11% higher than it was a week ago.

Since the stock has added US$5.1m 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 LightPath Technologies

Because LightPath Technologies 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 3 years LightPath Technologies saw its revenue grow at 4.7% per year. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In contrast, the stock has popped 37% per year in that time - an impressive result. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It seems likely that the market is pretty optimistic about LightPath Technologies, given it is losing money.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for LightPath Technologies in this interactive graph of future profit estimates.

A Different Perspective

Although it hurts that LightPath Technologies returned a loss of 9.4% in the last twelve months, the broader market was actually worse, returning a loss of 12%. Given the total loss of 5% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. It's always interesting to track share price performance over the longer term. But to understand LightPath Technologies better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with LightPath Technologies .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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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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