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Is Autodesk's (NASDAQ:ADSK) 229% Share Price Increase Well Justified?

Simply Wall St

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When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Autodesk, Inc. (NASDAQ:ADSK) share price has soared 229% in the last half decade. Most would be very happy with that. It's also good to see the share price up 21% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 14% in 90 days).

See our latest analysis for Autodesk

Autodesk isn't a profitable company, so 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last half decade Autodesk's revenue has actually been trending down at about 2.3% per year. On the other hand, the share price done the opposite, gaining 27%, compound, each year. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, we are a bit cautious in this kind of situation.

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

NasdaqGS:ADSK Income Statement, April 1st 2019

Autodesk is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Autodesk stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

It's nice to see that Autodesk shareholders have received a total shareholder return of 24% over the last year. Having said that, the five-year TSR of 27% a year, is even better. Before spending more time on Autodesk it might be wise to click here to see if insiders have been buying or selling shares.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.