Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. One bright shining star stock has been Chegg, Inc. (NYSE:CHGG), which is 760% higher than three years ago. It's also good to see the share price up 14% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 11% in 90 days).
Anyone who held for that rewarding ride would probably be keen to talk about it.
Because Chegg is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years Chegg has grown its revenue at 2.4% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. So we're surprised that the share price has soared by 105% each year over that time. We'll tip our hats to that, any day, but the top-line growth isn't particularly impressive when you compare it to other pre-profit companies. Shareholders would want to be sure that the share price rise is sustainable.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Chegg is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Chegg stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's nice to see that Chegg shareholders have received a total shareholder return of 65% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 49% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Chegg it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.
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If you spot an error that warrants correction, please contact the editor at email@example.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.