Datadog (NASDAQ:DDOG) grows 6.4% this week, taking five-year gains to 270%

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Datadog, Inc. (NASDAQ:DDOG) stock is up an impressive 270% over the last five years. In more good news, the share price has risen 14% in thirty days. But this could be related to good market conditions -- stocks in its market are up 6.1% in the last month.

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

See our latest analysis for Datadog

We don't think that Datadog's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, Datadog can boast revenue growth at a rate of 39% 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 30% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Datadog 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).

Datadog is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

Datadog's TSR for the year was broadly in line with the market average, at 35%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 30%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Datadog 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 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.