Investors might be losing patience for Napatech's (OB:NAPA) increasing losses, as stock sheds 15% over the past week

Napatech A/S (OB:NAPA) shareholders have seen the share price descend 21% over the month. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 404% in that time. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

While the stock has fallen 15% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Napatech

Because Napatech 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last half decade Napatech's revenue has actually been trending down at about 4.3% per year. So it's pretty surprising to see that the share price is up 38% per year. Obviously, whatever the market is excited about, it's not a track record of revenue growth. I think it's fair to say there is probably a fair bit of excitement in the price.

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're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Napatech

A Different Perspective

Napatech provided a TSR of 11% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 38% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Napatech you should know about.

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 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.