NEXTDC's (ASX:NXT) investors will be pleased with their favorable 76% return over the last five years
Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the NEXTDC share price has climbed 74% in five years, easily topping the market return of 12% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 9.1% , including dividends .
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for NEXTDC
Because NEXTDC 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. Shareholders of unprofitable companies usually expect strong 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 NEXTDC saw its revenue grow at 17% per year. That's well above most pre-profit companies. It's good to see that the stock has 12%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd expect the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling NEXTDC stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
NEXTDC shareholders gained a total return of 9.1% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Even so, be aware that NEXTDC is showing 2 warning signs in our investment analysis , you should know about...
NEXTDC 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 Australian 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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