The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Yext, Inc. (NYSE:YEXT) share price is up 42% in the last year, clearly besting than the market return of around 2.6% (not including dividends). That’s a solid performance by our standards! Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
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Given that Yext 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Yext saw its revenue grow by 34%. We respect that sort of growth, no doubt. Buyers pushed the share price 42% in response, which isn’t unreasonable. If revenue stays on trend, there may be plenty more share price gains to come. But it’s crucial to check profitability and cash flow before forming a view on the future.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Yext shareholders should be happy with the total gain of 42% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 17% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Yext is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.