- United States
Despite currently being unprofitable, Cloudflare (NYSE:NET) has delivered a 178% return to shareholders over 3 years
It might be of some concern to shareholders to see the Cloudflare, Inc. (NYSE:NET) share price down 14% in the last month. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 178% higher than it was. It's not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.
Although Cloudflare has shed US$1.5b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See 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. 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.
Cloudflare's revenue trended up 40% each year over three years. That's well above most pre-profit companies. Along the way, the share price gained 41% per year, a solid pop by our standards. But it does seem like the market is paying attention to strong revenue growth. That's not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized 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. So it makes a lot of sense to check out what analysts think Cloudflare will earn in the future (free profit forecasts).
A Different Perspective
Cloudflare shareholders are down 42% for the year, falling short of the market return. Meanwhile, the broader market slid about 10%, likely weighing on the stock. Fortunately the longer term story is brighter, with total returns averaging about 41% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Cloudflare (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
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 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.
CloudFlare, Inc. operates as a cloud services provider that delivers a range of services to businesses worldwide.
Adequate balance sheet with limited growth.