The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Proofpoint, Inc. (NASDAQ:PFPT) share price has soared 168% in the last half decade. Most would be very happy with that. It’s also good to see the share price up 22% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Given that Proofpoint didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
For the last half decade, Proofpoint can boast revenue growth at a rate of 31% 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 22% 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.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Proofpoint is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Proofpoint in this interactive graph of future profit estimates.
A Different Perspective
Proofpoint shareholders are down 7.8% for the year, but the market itself is up 2.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 22%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.