When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Model N, Inc. (NYSE:MODN) share price has soared 118% in the last half decade. Most would be very happy with that. On top of that, the share price is up 18% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Because Model N 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
For the last half decade, Model N can boast revenue growth at a rate of 9.0% per year. That's a pretty good long term growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 17% per year over in that time. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%
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 Model N's financial health with this free report on its balance sheet.
A Different Perspective
Model N shareholders are down 18% over twelve months, which isn't far from the market return of -18%. Longer term investors wouldn't be so upset, since they would have made 17%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. 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. For example, we've discovered 3 warning signs for Model N that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
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