New Relic, Inc. (NYSE:NEWR) shareholders might understandably be very concerned that the share price has dropped 37% in the last quarter. But the silver lining is the stock is up over five years. In that time, it is up 80%, which isn't bad, but is below the market return of 107%.
The past week has proven to be lucrative for New Relic investors, so let's see if fundamentals drove the company's five-year performance.
Because New Relic made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
For the last half decade, New Relic can boast revenue growth at a rate of 21% per year. Even measured against other revenue-focussed companies, that's a good result. It's nice to see shareholders have made a profit, but the gain of 12% over the period isn't that impressive compared to the overall market. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot - modest share price gains but good top line growth over the long term justifies investigation, in our book.
You can see below how earnings and revenue have changed over time (discover 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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on New Relic
A Different Perspective
It's nice to see that New Relic shareholders have received a total shareholder return of 9.4% over the last year. However, the TSR over five years, coming in at 12% per year, is even more impressive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with New Relic , and understanding them should be part of your investment process.
We will like New Relic better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.