The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Proofpoint, Inc. (NASDAQ:PFPT) stock is up an impressive 149% over the last five years. Then again, the 8.2% share price decline hasn't been so fun for shareholders. We note that the broader market is down 2.0% in the last month, and this may have impacted Proofpoint's share price.
Proofpoint wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 5 years Proofpoint saw its revenue grow at 26% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 20% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. Proofpoint seems like a high growth stock - so growth investors might want to add it to their watchlist.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Proofpoint is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Proofpoint stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Proofpoint shareholders are up 34% for the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 20% per year over five year. It is possible that returns will improve along with the business fundamentals. 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 Proofpoint 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 US exchanges.
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This article by Simply Wall St is general in nature. 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.
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