Cloudflare (NYSE:NET) climbs 5.2% this week, taking five-year gains to 525%

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Cloudflare, Inc. (NYSE:NET) shares for the last five years, while they gained 525%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 40% over the last quarter. We love happy stories like this one. The company should be really proud of that performance!

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

View our latest analysis for Cloudflare

Given that Cloudflare didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Cloudflare can boast revenue growth at a rate of 34% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 44% per year in that time. Despite the strong run, top performers like Cloudflare have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.

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

Cloudflare is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's nice to see that Cloudflare shareholders have received a total shareholder return of 44% over the last year. However, that falls short of the 44% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Cloudflare better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Cloudflare you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.