Bandwidth Inc. (NASDAQ:BAND) shareholders might be concerned after seeing the share price drop 23% in the last quarter. Looking on the brighter side, the stock is actually up over twelve months. However, its return of 15% does fall short of the market return of, 16%.
We don't think that Bandwidth's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over the last twelve months, Bandwidth's revenue grew by 15%. That's a fairly respectable growth rate. While the share price performed well, gaining 15% over twelve months, you could argue the revenue growth warranted it. If the company can maintain the revenue growth, the share price could go higher still. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Bandwidth in this interactive graph of future profit estimates.
A Different Perspective
Bandwidth shareholders have gained 15% over twelve months, which isn't far from the market return of 16%. However, the share price has actually dropped 23% over the last three months. It may simply be that the share price got ahead of itself, although you might want to check for any weak results. Before spending more time on Bandwidth it might be wise to click here to see if insiders have been buying or selling shares.
We will like Bandwidth better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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