MicroStrategy (NASDAQ:MSTR) shareholder returns have been splendid, earning 235% in 3 years

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the MicroStrategy Incorporated (NASDAQ:MSTR) share price has flown 235% in the last three years. That sort of return is as solid as granite. In more good news, the share price has risen 15% in thirty days.

Since the stock has added US$209m 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 MicroStrategy

MicroStrategy isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Over the last three years MicroStrategy has grown its revenue at 1.2% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In comparison, the share price rise of 50% per year over the last three years is pretty impressive. We'd need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It seems likely that the market is pretty optimistic about MicroStrategy, given it is losing money.

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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling MicroStrategy stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market gained around 6.4% in the last year, MicroStrategy shareholders lost 30%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 22%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - MicroStrategy has 4 warning signs (and 1 which is potentially serious) we think 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 US 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.