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Is Limelight Networks' (NASDAQ:LLNW) Share Price Gain Of 198% Well Earned?

Simply Wall St
·3 min read

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. Long term Limelight Networks, Inc. (NASDAQ:LLNW) shareholders would be well aware of this, since the stock is up 198% in five years. The last week saw the share price soften some 2.8%.

See our latest analysis for Limelight Networks

Because Limelight Networks 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. 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.

In the last 5 years Limelight Networks saw its revenue grow at 5.0% per year. Put simply, that growth rate fails to impress. So we wouldn't have expected to see the share price to have lifted 24% for each year during that time, but that's what happened. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. Some might suggest that the sentiment around the stock is rather positive.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Limelight Networks is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Limelight Networks in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that Limelight Networks shareholders have received a total shareholder return of 46% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 24% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Limelight Networks has 1 warning sign we think you should be aware of.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.