DroneShield (ASX:DRO) rallies 41% this week, taking five-year gains to 444%

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. For example, the DroneShield Limited (ASX:DRO) share price is up a whopping 444% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. Better yet, the share price has risen 41% in the last week.

Since it's been a strong week for DroneShield shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for DroneShield

We don't think that DroneShield's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, DroneShield can boast revenue growth at a rate of 60% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 40% per year in that time. Despite the strong run, top performers like DroneShield have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

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

We know that DroneShield has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on DroneShield's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that DroneShield shareholders have received a total shareholder return of 18% over the last year. However, that falls short of the 40% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand DroneShield better, we need to consider many other factors. Even so, be aware that DroneShield is showing 2 warning signs in our investment analysis , you should know about...

Of course DroneShield may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.