By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Bottomline Technologies (de), Inc. (NASDAQ:EPAY) share price is up 67% in the last three years, clearly besting than the market return of around 41% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 25% in the last year.
We don’t think that Bottomline Technologies (de)’s modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. As a general rule, if the market is looking past earnings to focus on revenue, there is a hope for, or expectation of, strong growth. That’s because it’s hard for shareholders to have confidence a company will grow profits significantly if it isn’t growing revenue.
Bottomline Technologies (de)’s revenue trended up 7.1% each year over three years. That’s not a very high growth rate considering it doesn’t make profits. In that time the share price is up 19% per year, which is not unreasonable given the revenue gorwth. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Bottomline Technologies (de) will earn in the future (free profit forecasts)
A Different Perspective
It’s good to see that Bottomline Technologies (de) has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That gain is better than the annual TSR over five years, which is 6.3%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Bottomline Technologies (de) is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.