The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Splunk Inc. (NASDAQ:SPLK) stock is up an impressive 184% over the last five years. On top of that, the share price is up 19% in about a quarter.
The past week has proven to be lucrative for Splunk investors, so let's see if fundamentals drove the company's five-year performance.
Given that Splunk didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Splunk saw its revenue grow at 21% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 23% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. Splunk seems like a high growth stock - so growth investors might want to add it to their watchlist.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Splunk is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Splunk will earn in the future (free analyst consensus estimates)
A Different Perspective
While the broader market gained around 33% in the last year, Splunk shareholders lost 21%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 23% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that Splunk is showing 1 warning sign in our investment analysis , you should know about...
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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. 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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