Those who invested in Performant Financial (NASDAQ:PFMT) three years ago are up 308%
Performant Financial Corporation (NASDAQ:PFMT) shareholders might be concerned after seeing the share price drop 26% in the last quarter. But over the last three years the stock has shone bright like a diamond. The longer term view reveals that the share price is up 308% in that period. Arguably, the recent fall is to be expected after such a strong rise. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Performant Financial
Performant Financial isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Performant Financial actually saw its revenue drop by 16% per year over three years. So it's pretty amazing to see the stock price has zoomed up 60% per year in that time. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Performant Financial shareholders are down 9.1% for the year, but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Performant Financial you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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