Carasent (OB:CARA) delivers shareholders fantastic 48% CAGR over 5 years, surging 11% in the last week alone

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Carasent ASA (OB:CARA) shares for the last five years, while they gained 509%. And this is just one example of the epic gains achieved by some long term investors. And in the last month, the share price has gained 30%. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the stock has added kr107m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Carasent

Given that Carasent didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

In the last 5 years Carasent saw its revenue grow at 42% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 44%(per year) over the same period. It's never too late to start following a top notch stock like Carasent, since some long term winners 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).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Carasent the TSR over the last 5 years was 604%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Carasent shareholders are down 5.4% for the year (even including dividends), but the market itself is up 8.3%. 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 48% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Carasent better, we need to consider many other factors. For example, we've discovered 2 warning signs for Carasent (1 is significant!) that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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