NEXTDC (ASX:NXT) lifts 5.1% this week, taking five-year gains to 111%

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the NEXTDC Limited (ASX:NXT) share price has soared 106% in the last half decade. Most would be very happy with that. And in the last week the share price has popped 5.1%.

Since the stock has added AU$487m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for NEXTDC

NEXTDC isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good 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.

For the last half decade, NEXTDC can boast revenue growth at a rate of 19% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 16% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes NEXTDC worth investigating - it may have its best days ahead.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling NEXTDC stock, you should check out this free report showing analyst profit forecasts.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between NEXTDC's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. NEXTDC hasn't been paying dividends, but its TSR of 111% exceeds its share price return of 106%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

NEXTDC's TSR for the year was broadly in line with the market average, at 14%. It has to be noted that the recent return falls short of the 16% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes NEXTDC a stock worth watching. 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 small cap companies at attractive valuations which insiders have been buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.