While shareholders of Q2 Holdings (NYSE:QTWO) are in the black over 1 year, those who bought a week ago aren't so fortunate

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Q2 Holdings, Inc. (NYSE:QTWO) share price is up 93% in the last 1 year, clearly besting the market return of around 21% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 45% lower than it was three years ago.

In light of the stock dropping 5.6% 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 one-year return.

See our latest analysis for Q2 Holdings

Given that Q2 Holdings 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Q2 Holdings grew its revenue by 9.0% last year. That's not a very high growth rate considering it doesn't make profits. In keeping with the revenue growth, the share price gained 93% in that time. While not a huge gain tht seems pretty reasonable. It could be worth keeping an eye on this one, especially if growth accelerates.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Q2 Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

It's nice to see that Q2 Holdings shareholders have received a total shareholder return of 93% over the last year. That certainly beats the loss of about 4% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Take risks, for example - Q2 Holdings has 3 warning signs we think you should be aware of.

We will like Q2 Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com