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Did The Underlying Business Drive Crexendo's (NASDAQ:CXDO) Lovely 488% Share Price Gain?

Simply Wall St
·3 min read

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the Crexendo, Inc. (NASDAQ:CXDO) share price, which skyrocketed 488% over three years. On top of that, the share price is up 63% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

View our latest analysis for Crexendo

We don't think that Crexendo'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 three years Crexendo has grown its revenue at 17% annually. That's pretty nice growth. Arguably the very strong share price gain of 81% a year is very generous when compared to the revenue growth. After a price rise like that many will have the business, and plenty of them will be wondering whether the price moved too high, too fast.

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

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Crexendo

A Different Perspective

It's good to see that Crexendo has rewarded shareholders with a total shareholder return of 207% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 35% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Crexendo has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.