Investing in Ooma (NYSE:OOMA) five years ago would have delivered you a 11% gain
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. But Ooma, Inc. (NYSE:OOMA) has fallen short of that second goal, with a share price rise of 11% over five years, which is below the market return. Meanwhile, the last twelve months saw the share price rise 3.3%.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Ooma
Because Ooma made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Ooma saw its revenue grow at 13% per year. That's a pretty good long term growth rate. While the share price has gained 2% per year for five years, that's hardly amazing considering the market also rose. Arguably, that means, the market (previously) expected stronger growth from the company.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Ooma's financial health with this free report on its balance sheet.
A Different Perspective
Ooma provided a TSR of 3.3% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 2% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Ooma is showing 1 warning sign in our investment analysis , you should know about...
Of course Ooma 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 American exchanges.
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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.
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