Megaport (ASX:MP1) climbs 6.6% this week, taking five-year gains to 177%

Megaport Limited (ASX:MP1) shareholders might be concerned after seeing the share price drop 11% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. We think most investors would be happy with the 177% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 31% in the last three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Megaport

Because Megaport 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. 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.

For the last half decade, Megaport can boast revenue growth at a rate of 35% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 23% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Megaport worth investigating - it may have its best days ahead.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Megaport 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 Megaport will earn in the future (free analyst consensus estimates)

A Different Perspective

It's good to see that Megaport has rewarded shareholders with a total shareholder return of 71% in the last twelve months. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Megaport better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Megaport you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.