Guidewire Software's (NYSE:GWRE) investors will be pleased with their respectable 49% return over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Guidewire Software, Inc. (NYSE:GWRE) share price is up 49% in the last 1 year, clearly besting the market return of around 25% (not including dividends). That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 24% higher than it was three years ago.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Guidewire Software

Guidewire Software 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Guidewire Software grew its revenue by 6.4% last year. That's not a very high growth rate considering it doesn't make profits. The modest growth is probably largely reflected in the share price, which is up 49%. While not a huge gain tht seems pretty reasonable. It could be worth keeping an eye on this one, especially if growth accelerates.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Guidewire Software is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Guidewire Software in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that Guidewire Software shareholders have received a total shareholder return of 49% over one year. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Guidewire Software better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Guidewire Software .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.