It is an investor's dream to be on board when a company releases record earnings, significant developments, or buyouts that result in massive gains. It is the best feeling to watch a stock in which you have invested your time, money, and energy experience a large increase in price. The following stocks have seen gains in excess of 160% over the last 12 months. With earnings being announced this week, investors must ask themselves a question: Is it time to take the profits or buy more shares? It is most difficult for an investor in this situation trying to determine what to do with a stock that has been so rewarding, since some will experience a massive sell off and others will keep rising to new highs.
IPG Photonics (IPGP) has seen yearly gains in excess of 260%. It trades with a market cap of $2.8 billion and a PE of 38.69. The year of 2010 was its best for financial rewards. It posted record revenue along with net income and assets that continue to increase every year. 2010 was very good but 2011 has started much better. The first quarter of 2011 saw revenue growth of 95% over the first quarter of 2010. The company expects revenue for the second quarter of $102-110 million a large increase year over year.
The growth of this company can easily be seen by the average investor. Naturally, you would expect a large run in price before earnings in preparation of an earnings report this good. Yet the stock has dropped nearly 20% since July 5 with no significant developments. I would be surprised if this stock did not see an increase in price on Monday before earnings as growth in this company is obvious. I would buy this stock and assume large returns since there have been no legitimate reasons for the drop in price. The stock is currently trading at $59.85 and I believe any price under $65 will return big gains. It is possible for investors to see 10-20% gains from earnings but the gains will be nothing in comparison to the next few years.
Ariad Pharmaceuticals (ARIA) has seen gains over 270% during the last year. These gains have been encouraged by collaborations and clinical data which suggest future success. These developments have left investors and multiple analysts excited about the potential for Ariad Pharmaceuticals.
I believe that Ariad will prove to be a major player in the biotechnology industry but will not produce with earnings. The company missed last quarter expectations by an EPS of 0.16 and the stock traded higher. I do not think I had ever seen a stock miss by so much and still see a gain in price. But Ariad has this type of belief in the company where investors are able to look past the short term financial loss to see the long term potential success. I would not feel comfortable in purchasing this stock because although it saw gains I do not believe it will happen again. The company releases earnings at 9:30 on August 2 and the economy could be suffering from failed debt negotiations. A missed quarter and panic within the market could prove a deadly combination for this stock.
Glu Mobile (GLUU) has a market cap of $374 million and has seen gains over 290% in one year. The stock has increased by increasing guidance, closing private placements, and annoucing several partnerships. The company recently issued guidance below estimates for Q2 only to increase it within the same month.
Over the last three years, the company's EPS has improved but is still negative. In the process of becoming more profitable, the revenue has decreased year over year as well. It leads me to believe its operations are not improving but are less expensive. I would not invest in this company until I see positive earnings. There is a legitimate chance the company could post positive EPS within the year, but losing money is not a formula for long term success. I expect the company to announce decent earnings and possibly see an increase in price. Yet investors should worry about buying into a company that is not producing positive net income.