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Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Elastic N.V. (NYSE:ESTC) share price is up 55% in the last year, clearly besting the market return of around 23% (not including dividends). So that should have shareholders smiling. Elastic hasn't been listed for long, so it's still not clear if it is a long term winner.
Elastic isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 Elastic saw its revenue grow by 53%. That's well above most other pre-profit companies. While the share price gain of 55% over twelve months is pretty tasty, you might argue it doesn't fully reflect the strong revenue growth. So quite frankly it could be a good time to investigate Elastic in some detail. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
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. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's nice to see that Elastic shareholders have gained 55% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 14% in that time. This suggests the company is continuing to win over new investors. It's always interesting to track share price performance over the longer term. But to understand Elastic better, we need to consider many other factors. Even so, be aware that Elastic is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
But note: Elastic may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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