LivePerson, Inc. (NASDAQ:LPSN) shareholders might understandably be very concerned that the share price has dropped 43% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 329% in that time. So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
LivePerson isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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, LivePerson can boast revenue growth at a rate of 15% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 34%(per year) over the same period. Despite the strong run, top performers like LivePerson have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
LivePerson is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think LivePerson will earn in the future (free analyst consensus estimates)
A Different Perspective
LivePerson shareholders are down 49% for the year, but the market itself is up 15%. 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 34%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 4 warning signs for LivePerson you should be aware of, and 1 of them is concerning.
But note: LivePerson may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.