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Does Extreme Networks's (NASDAQ:EXTR) Share Price Gain of 85% Match Its Business Performance?

Simply Wall St

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While Extreme Networks, Inc. (NASDAQ:EXTR) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. But don't let that distract from the very nice return generated over three years. In fact, the company's share price bested the return of its market index in that time, posting a gain of 85%.

Check out our latest analysis for Extreme Networks

Extreme Networks isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 3 years Extreme Networks saw its revenue grow at 28% per year. That's well above most pre-profit companies. While the compound gain of 23% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Extreme Networks on your radar. If the company is trending towards profitability then it could be very interesting.

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

NasdaqGS:EXTR Income Statement, July 17th 2019

This free interactive report on Extreme Networks's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Extreme Networks had a tough year, with a total loss of 22%, against a market gain of about 6.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 5.5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.