Yext (NYSE:YEXT) adds US$70m to market cap in the past 7 days, though investors from five years ago are still down 56%

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example the Yext, Inc. (NYSE:YEXT) share price dropped 56% over five years. That is extremely sub-optimal, to say the least. On the other hand the share price has bounced 8.7% over the last week.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Yext

Yext wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over five years, Yext grew its revenue at 5.9% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 9% for the last five years. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Yext stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Yext shareholders gained a total return of 12% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Yext better, we need to consider many other factors. For example, we've discovered 1 warning sign for Yext that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are 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.