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Did Avalara's (NYSE:AVLR) Share Price Deserve to Gain 39%?

Simply Wall St
·3 mins read

The Avalara, Inc. (NYSE:AVLR) share price has had a bad week, falling 13%. But that doesn't change the reality that over twelve months the stock has done really well. Looking at the full year, the company has easily bested an index fund by gaining 39%.

Check out our latest analysis for Avalara

Avalara wasn't profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year Avalara saw its revenue grow by 34%. We respect that sort of growth, no doubt. While the share price performed well, gaining 39% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Avalara is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Avalara will earn in the future (free analyst consensus estimates)

A Different Perspective

Avalara boasts a total shareholder return of 41% for the last year. And the share price momentum remains respectable, with a gain of 20% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Avalara you should know about.

Of course Avalara 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.