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Decibel Cannabis (CVE:DB) delivers shareholders notable 11% CAGR over 3 years, surging 17% in the last week alone

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, Decibel Cannabis Company Inc. (CVE:DB) shareholders have seen the share price rise 36% over three years, well in excess of the market return (19%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 26% in the last year.

Since the stock has added CA$10m 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 Decibel Cannabis

Decibel Cannabis 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

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Over the last three years Decibel Cannabis has grown its revenue at 64% annually. That's much better than most loss-making companies. While the compound gain of 11% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Decibel Cannabis on your radar. A window of opportunity may reveal itself with time, if the business can trend to profitability.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Decibel Cannabis will earn in the future (free profit forecasts).

A Different Perspective

Pleasingly, Decibel Cannabis' total shareholder return last year was 26%. So this year's TSR was actually better than the three-year TSR (annualized) of 11%. Given the track record of solid returns over varying time frames, it might be worth putting Decibel Cannabis on your watchlist. 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. For example, we've discovered 1 warning sign for Decibel Cannabis that you should be aware of before investing here.

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 CA exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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