The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Proofpoint, Inc. (NASDAQ:PFPT) shareholders would be well aware of this, since the stock is up 154% in five years. The last week saw the share price soften some 3.5%.
Proofpoint isn't a profitable company, so 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
For the last half decade, Proofpoint can boast revenue growth at a rate of 30% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 20% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Proofpoint worth investigating - it may have its best days ahead.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Proofpoint is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Proofpoint stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's nice to see that Proofpoint shareholders have received a total shareholder return of 27% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 20% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Proofpoint in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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