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It hasn't been the best quarter for Splunk Inc. (NASDAQ:SPLK) shareholders, since the share price has fallen 23% in that time. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 173% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.
Because Splunk 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. Shareholders of unprofitable companies usually expect strong 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 5 years Splunk saw its revenue grow at 25% per year. Even measured against other revenue-focussed companies, that's a good result. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 22% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Splunk worth investigating - it may have its best days ahead.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Splunk is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Splunk stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Splunk shareholders are up 8.4% for the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 22% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Splunk better, we need to consider many other factors. For example, we've discovered 2 warning signs for Splunk that you should be aware of before investing here.
Of course Splunk may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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. 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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