Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But if you pick the right individual stocks, you could make more than that. For example, the Pure Storage, Inc. (NYSE:PSTG) share price is up 40% in the last three years, slightly above the market return. In contrast, the stock is actually down 13% in the last year, suggesting a lack of positive momentum.
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Pure Storage isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
In the last 3 years Pure Storage saw its revenue grow at 35% per year. That's much better than most loss-making companies. While the compound gain of 12% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at Pure Storage. A window of opportunity may reveal itself with time, if the business can trend to profitability.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Pure Storage is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Pure Storage will earn in the future (free analyst consensus estimates)
A Different Perspective
Over the last year, Pure Storage shareholders took a loss of 13%. In contrast the market gained about 4.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 12% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Pure Storage 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.
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 firstname.lastname@example.org. 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.