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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Radware Ltd. (NASDAQ:RDWR) which saw its share price drive 154% higher over five years.
While Radware made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last 5 years Radware saw its revenue grow at 6.0% per year. That's not a very high growth rate considering the bottom line. So we wouldn't have expected to see the share price to have lifted 20% for each year during that time, but that's what happened. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. It may be that the market is pretty optimistic about Radware.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Radware has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Radware's financial health with this free report on its balance sheet.
A Different Perspective
Radware provided a TSR of 23% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 20% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Radware better, we need to consider many other factors. Even so, be aware that Radware is showing 2 warning signs in our investment analysis , 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.
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