- Oops!Something went wrong.Please try again later.
For many, the main point of investing in the stock market is to achieve spectacular returns. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, the Performant Financial Corporation (NASDAQ:PFMT) share price rocketed moonwards 730% in just one year. On top of that, the share price is up 122% in about a quarter. Looking back further, the stock price is 124% higher than it was three years ago.
Anyone who held for that rewarding ride would probably be keen to talk about it.
Given that Performant Financial didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.
In the last year Performant Financial saw its revenue shrink by 12%. So it's very confusing to see that the share price gained a whopping 730%. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. To us, a gain like this looks like speculation, but there might be historical trends to back it up.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. So it makes a lot of sense to check out what analysts think Performant Financial will earn in the future (free profit forecasts).
A Different Perspective
It's good to see that Performant Financial has rewarded shareholders with a total shareholder return of 730% in the last twelve months. That's better than the annualised return of 18% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Performant Financial better, we need to consider many other factors. Even so, be aware that Performant Financial is showing 2 warning signs in our investment analysis , you should know about...
Of course Performant Financial 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 (at) simplywallst.com.