The past five years for SolarWinds (NYSE:SWI) investors has not been profitable

SolarWinds Corporation (NYSE:SWI) shareholders should be happy to see the share price up 13% in the last quarter. But over the last half decade, the stock has not performed well. After all, the share price is down 66% in that time, significantly under-performing the market.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for SolarWinds

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, SolarWinds moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The revenue decline of 2.5% isn't too bad. But if the market expected durable top line growth, then that could explain the share price weakness.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that SolarWinds has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on SolarWinds

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between SolarWinds' total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. SolarWinds hasn't been paying dividends, but its TSR of -24% exceeds its share price return of -66%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

We're pleased to report that SolarWinds shareholders have received a total shareholder return of 47% over one year. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand SolarWinds better, we need to consider many other factors. Take risks, for example - SolarWinds has 3 warning signs (and 1 which is concerning) we think you should know about.

But note: SolarWinds may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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

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.