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Dropsuite's (ASX:DSE) investors will be pleased with their enviable 465% return over the last three years

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Dropsuite Limited (ASX:DSE) shareholders have seen the share price descend 19% over the month. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 465%. As long term investors the recent fall doesn't detract all that much from the longer term story. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Dropsuite

Dropsuite 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Dropsuite's revenue trended up 28% each year over three years. That's much better than most loss-making companies. And it's not just the revenue that is taking off. The share price is up 78% per year in that time. It's always tempting to take profits after a share price gain like that, but high-growth companies like Dropsuite can sometimes sustain strong growth for many years. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.

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

Take a more thorough look at Dropsuite's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Dropsuite had a tough year, with a total loss of 2.8%, against a market gain of about 3.7%. 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. On the bright side, long term shareholders have made money, with a gain of 24% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Dropsuite better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Dropsuite you should know about.

Of course Dropsuite 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 AU exchanges.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.