Investors push PagerDuty (NYSE:PD) 7.1% lower this week, company's increasing losses might be to blame

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the PagerDuty, Inc. (NYSE:PD) share price is up 87% in the last three years, clearly besting the market return of around 62% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 3.7%.

In light of the stock dropping 7.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

View our latest analysis for PagerDuty

PagerDuty isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years PagerDuty has grown its revenue at 27% annually. That's much better than most loss-making companies. The share price rise of 23% per year throughout that time is nice to see, and given the revenue growth, that gain seems somewhat justified. So now might be the perfect time to put PagerDuty on your radar. If the company is trending towards profitability then it could be very interesting.

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

PagerDuty is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling PagerDuty stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Pleasingly, PagerDuty's total shareholder return last year was 3.7%. But the three year TSR of 23% per year is even better. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for PagerDuty that you should be aware of before investing here.

For those who like to find winning investments this free list of growing 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.