Groupon (NASDAQ:GRPN) shareholders are still up 52% over 1 year despite pulling back 9.7% in the past week

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Groupon, Inc. (NASDAQ:GRPN) share price is up 52% in the last 1 year, clearly besting the market decline of around 3.4% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 15% lower than it was three years ago.

While the stock has fallen 9.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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Groupon 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Groupon actually shrunk its revenue over the last year, with a reduction of 4.3%. The stock is up 52% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's good to see that Groupon has rewarded shareholders with a total shareholder return of 52% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 1.0% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. For example, we've discovered 1 warning sign for Groupon that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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